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.

This article explains how the Morningstar Dividend Composite Index and the Morningstar Dividend Leaders Index are constructed. The weighting system used in these indexes is designed so that the indexes are highly macro consistent, investable and have low

Morningstar outlines how The Morningstar Rating™ for stocks is derived, and also outlines the analytical work that feeds into our coverage of stocks. Underlying the rating is a focused methodology and standardized set of procedures and core valuations to

The rating methodology described herein will generally be applied to the new issuance and surveillance of ratings of U.S. residential mortgage-backed securities by Morningstar Credit Ratings, LLC (“Morningstar”). A rating that is assigned based on this m

Mean-variance optimization has been the standard for creating asset allocation strategies. In Morningstar's asset allocation optimization methodology document, we describe the limitations of MVO and discusses asset-class modeling and portfolio optimizati

This document describes the methodology behind the Morningstar Analyst Rating™ for U.S. closed-end funds; the summary expression of our forward-looking analysis of a fund. Ratings are assigned globally on a five-tier scale. Our global analyst team has id

This document describes the methodology behind the Morningstar Analyst Rating™ for funds; the summary expression of our forward-looking analysis of a fund. Ratings are assigned globally on a five-tier scale. Our global analyst team has identified five ke

Morningstar® Analyst Rating™ for is the summary expression of Morningstar's forward-looking analysis of a fund. Morningstar analysts assign the ratings on a five-tier scale with three positive ratings of Gold, Silver, and Bronze, a Neutral rating, and a

This paper establishes a flexible framework for estimating credit risk and illiquidity risk for guaranteed products, so their “true” risks are reflected in the inputs to asset-allocation-oriented optimizations. Ignoring or inaccurately estimating illiqui

This document presents our method of calculating the portfolio performance attribution: comparing a portfolio's performance with that of a benchmark and analyzing components of the excess return to explain the impact of various investment decisions.