Question

In: Finance

2.While stock selection is best approached from the bottom-up, ignoring the top-down can be extraordinarily expensive....

2.While stock selection is best approached from the bottom-up, ignoring the top-down can be extraordinarily expensive. The bottom-up can also inform the top-down. As Ben Graham pointed out “True bargain issues have repeatedly become scarce in bull markets (James Montier) 2.1. Differentiate between the bottom-up and top-down approach to fundamental analysis.(3) 2.2. Do you think investors should choose between the two approaches, or do you believe that they are complimentary? (3)

Solutions

Expert Solution

A. Bottom up investment is incline towards buying up stocks from the stock specific point of view and it will be determining the firm specific factor rather than macro factors and it will be trying to value the company according to the performance of the company and it will be taking into perspective the financial reports and the demand growth and the future performance of the company so it is related to determination of the value of the company from the firm specific factors.

Top down investment approach is related to making investment after analysing the Macro picture which will be determination of the overall economy and understanding the demand and supply in the bigger picture through analysis of the overall economy which will consider the macrotrends like changing economic cycles and changing monetary policies and the growth rate of the economy while making decisions regarding investment into a company so it is a macro analysis approach.

B. I believe they are complementary in nature and investors should be accounting for both the approach while making valuation of a company and investment decision because they should be trying to incorporate bottoms up investing which will be incorporation of the firm specific factors and it will also consider the overall macrotrends because company will always be a part of the economy and its performance will be relative to that of economy and it will be complementary in nature so they would be trying to always incorporate and synchronise the the macro and micro Trends before making a investment decision by incorporation of both the fundamentals of top-down and bottoms-up approach.


Related Solutions

4)“Bottom-up” vs. “Top-down” Perceptual Processing a). Bottom-up processing – define/ explain what it is. b)Top-down processing...
4)“Bottom-up” vs. “Top-down” Perceptual Processing a). Bottom-up processing – define/ explain what it is. b)Top-down processing - define/ explain what it is. You can use this example: Ca_yo_re_dt_is_en_en_e? C). In perception, bottom-up and top-down processing are believed to occur simultaneously. Explain what that means.
what is the difference between top down and bottom up processing?
what is the difference between top down and bottom up processing?
list the advantage and shortcoming of bottom-up and top-down methods
list the advantage and shortcoming of bottom-up and top-down methods
Describe the impact of bottom up and top down processing on perception.
Describe the impact of bottom up and top down processing on perception.
Explain how top-down and bottom-up processes guide attention.
Explain how top-down and bottom-up processes guide attention.
25. Top-­‐down processing is to ______, as bottom-­‐up processing is to ______. a. inductive reasoning; deductive...
25. Top-­‐down processing is to ______, as bottom-­‐up processing is to ______. a. inductive reasoning; deductive reasoning b. pattern recognition; expectations and motivations c. perceptual set; perceptual category d. perceptual category; perceptual set 26. List steps for sensation, in order as they occur: a. accessory structure modifies stimulus, coding from sensory nerve to CNS, transduction of stimulus energy to neural information, thalamus relays response, cortex receives input b. accessory structure modifies stimulus, thalamus relays response, coding from sensory nerve to...
True/False: Bottom-up and top-down proof procedures can be proven to be sound and complete. Select one:...
True/False: Bottom-up and top-down proof procedures can be proven to be sound and complete. Select one: True False Question 10 Question text Which of the following algorithm selects a successor of the current assignment that most improves some evaluation function and if there are several possible successors that one is chosen at random? Select one: a. Consistency algorithm b. Generate-and-Test algorithm c. Constraint algorithm d. Iterative Best Improvement algorithm Clear my choice Question 11 Question text Which of the following...
(1) Describe the top-down budget method. What are its advantages and disadvantages? (2) Describe the bottom-up...
(1) Describe the top-down budget method. What are its advantages and disadvantages? (2) Describe the bottom-up budget method. What are its advantages and disadvantages? (3) Which budget method (top-down or bottom-up method) is more likely to result in budgetary slack? Why?​
(1) Describe the top-down budget method. What are its advantages and disadvantages? (2) Describe the bottom-up...
(1) Describe the top-down budget method. What are its advantages and disadvantages? (2) Describe the bottom-up budget method. What are its advantages and disadvantages? (3) Which budget method (top-down or bottom-up method) is more likely to result in budgetary slack? Why?
-       The difference between sensation and perception. The difference between bottom-up and top-down processing, this is...
-       The difference between sensation and perception. The difference between bottom-up and top-down processing, this is as important as it can get. Examples of top-down processing related factors such as visual context, expectations effects, regularities in the environment, and the Gestalt rules of perceptual grouping. Examples of depth cues must be familiar and they could be discussed in relation to bottom-up and top-down processing. The role of top-down processing in the hollow-face illusion and the Ames room illusion is important.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT