Methodology Documents

Morningstar has conducted research on active and passive investment strategies and their associated vehicles since 1986.

This paper outlines the key assumptions and details behind our quantitative equity rating methodology.

We believe that a company's intrinsic worth results from the future cash flows it can generate. The Morningstar Rating for stocks identifies stocks trading at a discount or premium to their intrinsic worth--or fair value estimate, in Morningstar terminology.

This document describes the rationale for, and the formulas and procedures used in, calculating the Morningstar Rating for funds (commonly called the “star rating”). This methodology applies to funds receiving a star rating from Morningstar.

This paper outlines the key assumptions and details behind our quantitative equity rating methodology.

Morningstar developed the Morningstar Equity Comparables system to give investors and financial professionals an objective benchmark for comparing companies. Morningstar Equity Comparables is genuinely different to other industry classification schemes. We start from the bottom up with comparable companies, as opposed to the top down with sector definitions. For every pair of companies, we determine how similar they are–anywhere from closely comparable to distantly related based on automated analysis of the companies' own business description. We automatically analyse the text of the business description and work out whether companies are talking about similar things as they describe their businesses. Businesses described in similar terms are comparable.

Issuance activity in U.S. private-label residential mortgage-backed securities (RMBS) continues to stagnate, reflecting structural challenges including regulatory uncertanty and macroeconomic factors. This paper categorizes the hurdles facing the nonagen

This paper offers evidence that investor risk aversion is time-varying and that changes in risk aversion are primarily related to changes in investor expectations instead of historical market returns.

The target-date industry has shown many signs of a maturing, stabilizing market, though there's still plenty of dynamism to be found. Target date funds continue to upend expectations, but other less-favorable trends also continue.

This paper analyzes the trend of decreasing mutual fund fees against the recent history of growing total industry assets under management.

This study focuses on measuring Tracking Efficiency in Chinese equity ETFs. In order to better evaluate Chinese ETFs, this study focuses on more than tracking methods, as it also touches upon the following factors: trading costs, product and index constr

Morningstar has conducted qualitative, analyst-driven research on 529 college-savings plans since 2004, providing data on 84 traditional 529 plans, which are included in this study. Assets in 529 plans continue to climb, and plan sponsors have generally

The Morningstar Fee Level for mutual funds was developed to help investors compare an investment vehicle’s relative level of fees with those of similar investment vehicles. There are three different Morningstar Fee levels: Morningstar Fee Level-Broad, Mo

Morningstar Category classifications sorts portfolios into peer groups based on their holdings. The categories help investors identify the top performing funds, assess potential risk, and build well-diversified portfolios. Here is how those categories ar

Morningstar Category classifications sorts portfolios into peer groups based on their holdings. The categories help investors identify the top performing funds, assess potential risk, and build well-diversified portfolios. Here is how those categories ar

This paper examines the relationship between asset managers' stewardship attributes and investor outcomes, and finds that better stewards of capital generally deliver better overall fund performance.

This paper discusses Morningstar's view of the 699 ETF managed strategies it tracks, giving investors and advisors insight into industry performance at Q42013.

Financial assets such as stocks and bonds ar only one component of an investor's total economic worth. Other assets, such as human capital, real estate, and pensions often represent a significant portion of an investor's total wealth. These assets, howev

Here we explore our quantitative equity and credit ratings, which are empirically driven and based on the proprietary ratings our analysts are already assigning to stocks.

ETF managed portfolios are investment strategies that typically have more than 50% of portfolio assets invested in ETFs. Primarily available as separate accounts, they represent one of the fastest-growing segments of the managed account universe.