Top-down Approach
In simple terms, top-down approach is an investment strategy that selects various sectors or industries and tries to achieve a balance in an investment portfolio. The top-down approach analyzes the risk by aggregating the impact of internal operational failures. It measures the variances in the economic variables that are not explained by the external macro-economic factors. As such, this approach is simple and not data-intensive. Top-down approach relies mainly on historical data. This approach is opposite to bottom-up approach.