A portfolio manager who uses the "top down" approach to investment evaluation would most likely begin her examination with which of the following?
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A. B. C. D. E. F.D
The top down approach typically begins with an examination of the macroeconomic environment, then progresses to an examination of alternative economies and securities markets, then to an analysis of specific industries, and finally to the examination of specific securities. The objective of the top down approach is to first decide how to allocate investment funds among various economies and styles of securities (bonds, equities, cash, etc.), then to decide which economies and industries will prosper in the current environment. The objective of the last stage of the top down approach (i.e. the examination of individual securities and companies) is to determine which companies within the selected industries offer superior investment prospects (i.e. identify investments that are undervalued).