What is the methodological sequence followed in a 'Top-Down Equity Research Approach'?

[ A ]Company Stock Screener -> Industry Analysis -> Macroeconomy.

[ B ]Global & Domestic Macroeconomic Analysis -> Industry & Sector Identification -> Company Financial & Valuation Selection (Economy -> Industry -> Company).[ CORRECT ]

[ C ]Buying stocks based on social media rumors without any research.

[ D ]Analyzing only physical factory machinery.

Takeaway

Option B is correct: Global & Domestic Macroeconomic Analysis -> Industry & Sector Identification -> Company Financial & Valuation Selection (Economy -> Industry -> Company).

Derivation

Top-Down research follows the Economy-Industry-Company sequence, starting broad and progressively narrowing focus. The analyst first assesses the macroeconomic backdrop, growth, inflation, interest rate cycle, both globally and domestically, to identify which conditions are likely to prevail. From there, they identify which industries stand to benefit or suffer under those conditions, narrowing the universe before ever looking at an individual stock. Only in the final stage does the analyst drill into specific companies within the favored sector, applying valuation to select the best positioned names. This mirrors Bottom-Up research, which instead starts by screening attractive companies on their own fundamentals first.

Why the others fail

A — Company Stock Screener -> Industry Analysis -> Macroeconomy.

Screening individual companies first and only later considering industry and macro context describes the Bottom-Up methodology, the reverse of Top-Down's sequence.

C — Buying stocks based on social media rumors without any research.

Trading on unverified social media rumors bypasses any structured research methodology entirely and violates basic professional research standards.

D — Analyzing only physical factory machinery.

Analyzing physical factory machinery is a narrow operational engineering exercise, unrelated to the Economy-Industry-Company sequence Top-Down research follows.