can you tell me the differences between the top down and bottom up approaches. what is the major assumption that causes the differences in these two approaches?
In the top-down approach, an investor focuses on an industry that s/he feels will do well -- and then chooses one or more companies within that industry. The assumption is that many companies in a booming industry, such as tech stocks in the late 1990s, will increase their values. In the bottom-up approach, an investor studies one stock at a time, regardless of the industry its in. This approach assumes that a good company will make money even when its industry as a whole isn't very profitable.
Check these sites for a lot more information.
http://www.fool.co.uk/news/investing/investing-strategy/2007/01/19/top-down-or-bottom-up.aspx
http://stocks.about.com/od/researchtools/a/030506screen.htm
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http://www.tiaa-cref.org/about/press/publications/market_monitor/2006_11_20.pdf
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