What is Empirical Evidence?

//What is Empirical Evidence?
What is Empirical Evidence? 2017-10-04T07:09:42+00:00

Definition: Empirical evidence is defined as the data and information obtained by creating assumptions over a specific topic, observing the collected data and experimenting to prove or disprove a theory.

What Does Empirical Evidence Mean?

What is the definition of empirical evidence? Empirical data involves the development of assumptions that pertain to the topic at hand. Analysts collect the relevant, and through empirical research, they observe how these data can prove or disprove their theory.

The empirical data can be qualitative or quantitative. Qualitative data investigate the human behavior and try to explain, for instance, investor or consumer psychology. Quantitative data quantify the observations of qualitative data by using statistical methods, aiming to refine the research. Empirical evidence requires accuracy and integrity of the data so that the research is considered valid and unbiased.

Let’s look at an example.

Example

Alex is a financial analyst, and he is researching the financial institutions in Singapore. The purpose of the research is to provide empirical data on the factors that drive growth in the financial institutions of Singapore, and what are the benefits for the domestic economy.

Alex collects qualitative data on Singapore’s banking system that consists of commercial banks, merchant banks, and finance companies. Commercial banks are the largest funding source of the banking system offering retail banking, financing facilities, and foreign exchange facilities. Merchant banks focus on the short-term money market and finance offering corporate financing, management advisory, and portfolio management services. Finance companies specialize in credit facilities, debt management, real estate, and personal loans.

Then, Alex collects quantitative data about the total assets of the financial institutions in Singapore between 1990 and 2015. The data are collected from macroeconomic data published in the annual reports of the financial institutions and from published balance sheet information. Furthermore, Alex has investigated the broader economic conditions during the investigated period to be able to understand consumer and investor psychology.

Finally, he performs a series of statistical methods, and he calculates banking liquidity and performance ratios. Alex concludes that the banking system in Singapore is efficient and competitive.

Summary Definition

Define Empirical Evidence: Empirical evidence is firsthand scientific data collected by observing or experimenting with a subject.