“Bottom up estimates may be more optimistic than top down heading into a recession and more pessimistic that top down coming out”
Reference: CFA curriculum Reading 16,Example 7.
I don’t understand rationale behind this. Can anyone explain the concept behind it.
Thanks.
Regards
Jahid.
as a company my last month i did a million in sales
industry is tanking … but as a company i still believe that my estimates are better than the industry’s - so my estimates are more optimistic than the top down industry estimate.
similarly on a heading out of recession … industry understands that things are better - so their estimates are better than my own which are lower (pessimistic).
Good example