Question

what is better top down, or bottom up betas and why?

Answer 1

Bottom up betas are more precise (the law of large numbers), more forward looking (because you can change the business mix for a company and its financial leverage) and can be estimated for private businesses as well as young publicly traded firms. Regression betas are volatile and can be different, depending upon your estimation choices on how far back to go, the return interval you use and the index chosen.