Fundamental Analysis - Approach
Analysts and investors use two alternative approaches for fundamental analysis:
• “Top-down” forecasting approach;
• “Bottom-up” forecasting approach.
Using “top-down” forecasting approach the investors are first involved in making the analysis and forecast of the economy, then for industries, and finally for companies. The industry forecasts are based on the forecasts for the economy and a company’s forecasts are based on the forecasts for both its industry and the economy.
Using “bottom-up”forecasting approach, the investors start with the analysis and forecast for companies, then made analysis and forecasts for industries and for the economy.