In the CFA text, one problem says the bottom up approach applies growth/market share change to individual units or companies.
However, one problem states that a bottom up approach exists because the market share change was applied to an individual unit in a company, while another problem says that a market share change applied to a entire company entails a top down approach.
I do not understand the difference between the two. Could anyone help?
do not use company for both parts of the statements above.
Bottom up:
You have many companies in an INDUSTRY - and you take the individual parts [which are at the BOTTOM] (each individual company’s performance) and add it up to arrive at the Industry performance.
Top Down:
You take the high level [TOP] Industry level performance and push it DOWN to all companies in that Industry.
I understand how applying growth in GDP to industry and then down to change in company market share would imply a top down approach. However, in the problem that I am looking at, it says when the change in market share is applied to an individual product line, this would imply a bottom up approach.
That is what is confusing for me.
Wouldn’t you assume that change in market share for an individual product line (based upon industry trends) would still imply a top down approach?