NISM Certifications · NISM-Series-XV: Research Analyst · Industry Analysis
Which of the following is a commonly used top-down approach step when a research analyst begins equity research on a company?
In the top-down approach, the analyst studies the economy first, then the industry, and finally the individual company. This moves from broad conditions to specific factors, in contrast to the bottom-up approach that begins with the company itself.
- AStart with company financial ratios and then examine the economy
- BAnalyse the economy first, then the industry, and then the companyCorrect
- CAnalyse the company first, then its industry, then the economy
- DAnalyse only technical charts and ignore the economy
Explanation
The top-down approach moves from the general to the specific: macroeconomic conditions, then industry prospects, then company-level analysis. The bottom-up approach reverses this order by starting with the company.
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