No joke.
There are two types of economic forecast analysis: top-down and bottom-up.
When to use top-down, bottom-up, and both?
Top-Down starts with with analyzing the aggregate economy using things like economic reports, then uses these estimates to interpret what the best sectors, industries, and securities will be.
Bottom-Up starts with analyzing specific companies then making projections on the best industries, sectors, and finally the economy.
Top down is best used in trending markets. Analysts are often surprised on high side of their individual security analysis when quarterly earning are presented. Using a Top-Down analysis for a trending market often gives a more accurate reading.
Bottom-Up is best used in markets where reversals are taking place. Economic reports are often slow to react to business cycle changes. Since Bottom-Up forecasting starts at the company level, it can react to these changes faster.
Using both, I believe can only make predictions more robust, so I would think it would always be prudent to use both in order to get the whole story.
excellent summary - thanks fin
thanks.