Explain whether top-down or bottom-up forecasting is more appropriate for each of the different investors.

1. The MegaCosmos Mutual Fund has a stated goal of investing in the stock market composites of developed country economies in North America, Western Europe, and Japan. Its return target is expressed in euros. The fund may or may not hedge individual country currency returns depending on its outlook for foreign exchange rates. Furthermore, the fund attempts to track individual country stock market composites while minimizing tracking error via the use of index baskets wherever possible.

2. EMF Advisers is a boutique firm that manages a dedicated portfolio of electric, gas, and water utility companies domiciled in the United States. The portfolio EMF oversees is, in turn, a small part of the American Pipefitters Union Pension Plan.

3. Bocage International is a hedge fund that actively bets on the relative attractiveness of stocks, interest rates, currencies, and commodities. Its investment in equities is limited to futures and options on exchange-traded equity indexes.

4. Alpha Bet Partnership is an investment vehicle featuring a U.S. long/short overlay.

Specifically, the partnership may keep short positions in U.S. equities in an amount not to exceed 30 percent of the net value of the partnership. All short positions must be invested in U.S. equities to maintain an overall beta of 1.0. The partnership hopes for the stocks it owns to outperform the stocks it has sold short in order to generate a respectable alpha. The partnership specifies that with the objective of minimizing tracking error, every stock sold short must be matched by a stock bought in the same industry.