bottom-up more pessimistic when coming out recession?

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Bottom-up estimates may be more optimistic than top-down heading into a recession, and more pessimistic than top-down coming out……Page 155 Volume 3 Curriculum
if bottom-up approach can be effective in anticipating cyclical turning, why would it more pessimistic when coming out recession?
Another question, just out of my mind, are those leading indicators bottom-up or top-down?
thx
 
Using bottom up approach skews the analysis towards trends. Managers generally believe in trends and do not anticipate reversals. When the going is good they expect it to remain good and when it is bad they expect it to remain bad.
 
I think your correlation may be spurious. The qoute doesn’t say that if you have more optimistic bottom-up estimates then the economy is definately heading toward recession. You can have more optimistic bottom-up ests. anytime - they are just likely to occur at the beginning of a recession, and maybe 50-50 otherwise. So I don’t think these are “effective” predictors.
That being said…
I think these may be more pessimistic when coming out of recession b/c the stock mkt generally does most of its gaining before the economy gains steam, so most of the gains are already realized. b/c of this stocks will have less room to grow, while the economy is right at the beginning of its growth spurt.
Top estimates of future growth will be higher than bottom estimates.
 
Same question… Old thread that never really was fully resolved.
Struggling with Bottom up “better at detecting cyclical economic and profit upturns” (b/c TD rely on historicals, so they’re slow)…BUT bottom up are “more pessimisti than TD coming out of a recession b/c they wait for compaines they follow to change their forecasts.”
What is the distinction?
 
An analogy:
Try this: apply a Moving Average to a stock index.. the stock index is the “economy”, the moving average is the “bottom-up forecast”.. (well, technically no but let’s just think of them as such in this example.) Just before stocks decline, the moving average will continue going up.. and just before stocks explode to the upside after a bear market, the moving average will continue moving down or sideways.
 
I believe there is a core distinction:
Bottom-up estimates from third parties such as investment banks could be biased and end up overly optimistic/pessimistic. Or your own estimates could be biased if you listen to overly optimistic conference calls.
However, the core tools in bottom-up analysis could be better at analyzing turning points, if you are able to conduct the analysis in an unbiased way. IE using inventory to sales ratios, etc.
 
Agree with SWhip’s way of thinking, but I feel like the third party is more of the manager of the company. Usually managers are optimistic other their company in order to attract investors, however during bad times if they’re too optimitic and they don’t perform they might get fired…
Top down the bias info is only at the end. Most of the top down approach are less bias because it’s looking at econmic data instead of managerial guidlines and expectation.
 
Bottom-up managers’ surveys result in overly optimistic forecasts and managers simply tend to think that their companies are going to do better than the rest of the market.
 
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