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What is Financial Industry Analysis?

M. McGee
By M. McGee
Updated May 17, 2024
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Financial industry analysis is the study of securities for the purpose of making informed decisions about the future of the market. By using a variety of methods, it is possible to chart out trends in any market. Since the securities market has so many regulations present to prevent wrongdoing, the wealth of information available is staggering. By examining this information, it is possible to figure out what trends have happened in the past and apply that information to the future. This process is used in a number of industries under different names such as telecommunications analysis or media analysis.

The financial industry is a broad term for the buying and selling of securities. This means the industry ranges from the stock market to investing with a 401k retirement plan and government savings bonds. Since the industry is so large, it isn’t unusual for people to narrow down the scope when referring to a particular part, such as referring to the ‘commodities market’ when only looking at that one area.

Market analysis is a method of combing through historical information to find correlations with current activities. If a market developed 20 years ago that exhibited the same base factors as a market today, it is possible to make predictions on the current market based on what was done in the past. Since one situation is never exactly like another, it always has a margin for error.

In addition to historical information, financial industry analysis uses information from important figures and companies within the current financial world. For example, if an analyst talks to the owner of a very successful company and they discuss branching out into a new field, the future activity will have a direct effect on the current players in the existing field. By using financial industry analysis, investors would know whether to buy up securities in that area or divest they ones the currently possess.

The cornerstone of these processes is access to information. The more information the analyst has, the more accurate the predictions that are made. The reason financial industry analysis tends to have a higher accuracy than other forms of analysis can be traced right back to information. In most devolved countries, the securities market is highly regulated by the government. The records generated by these regulations are typically public information, so analysts always have information to work with.

The main current focus in financial industry analysis is on small traders. Before, professional stock brokers handled the majority of stock trades. Now, individuals have access to many of the same platforms as professionals and are demanding the same analysis tools. As a result, the underlying processes of financial industry analysis are being automated to allow a greater number of people immediate insights into the financial market.

WiseGEEK is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.

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