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.

Morningstar uses a series of six individual models working in unison to algorithmically assess a vehicle and assign the People, Process, and Parent Pillar ratings to it for those assigned Directly, by Algorithm.

Data Content Guide

In the face of a recession, investors are looking for advice.

Morningstar Sustainalytics Low Carbon Transition Rating assesses the degree to which a company’s projected Greenhouse Gas Emissions (GHG) differ from its fair-share budget for GHG emissions.

Over the past decade, cryptocurrencies have witnessed an unprecedented surge, establishing themselves as a prominent investment avenue.

The Morningstar Risk Model is a holdings-based model that helps identify and assess the risk in one’s investments.

A report on investor returns in the United States.

Global funds and exchange-traded funds had $54 billion of inflows in the first half of 2023, but only one category group, fixed income, had inflows. Its $236 billion flow more than made up for all other groups.

Article 8 funds bleed money again, while Article 9 funds register their lowest inflows on record.

Challenging market conditions continue to weigh on investor sentiment and flows into the space.

Strong markets in the second quarter of 2023, with outperformance of U.S. growth stocks.

While thematic investing has gained popularity, it is not without its challenges. Morningstar has created a new metric called the Consensus Purity Score to help overcome these challenges for equities and equity-linked products.

Recent weakness among Morningstar dividend indexes is less about interest rates than a narrow equity market; long-term upside remains.

A new approach to estimating the daily values of venture capital-backed companies.

Revenue sources for Morningstar Indexes' 48 country benchmarks show interconnectedness—at least among developed markets.

Selecting a comparable fund on specified criteria.

This document describes an approach for incorporating structured products, or SPs, into the methodology framework of Morningstar Risk Model, or RM, and Morningstar Portfolio Risk Score, or MPRS. This allows investors to assess the risk, in terms of expec

The paper contains information about Morningstar Manager Research Coverage in Australia & New Zealand

In this paper, we study two alternatives to the commonly used Pearson correlation.

This study compares the systematic withdrawal strategy against four retirement-income bucket strategies: the cash flow reserve bucket strategy, two variations of the three buckets strategy, and the time bucket strategy.

Our take on the digital advice industry and the best options for individual investors.

Three simple steps to align your value proposition to your prospective clients’ hiring decisions.

In our research, we dove into understanding what motivates a person to hire a financial advisor. Although we see the expected importance of seeking an advisor to address specific financial needs, we also found more emotionally based factors can contribut

The year 2022 was tough, but medium- and long-term performance holds up.

How differently do the Big Three vote on ESG resolutions?

In this paper, we share the results of empirical testing with indexes of various sizes and different constraint scenarios to better understand how these settings affect the performance of the five algorithms in terms of tracking error and running time.

A rotation in Morningstar factor index leadership demonstrates how momentum investing can stumble amid market reversals.

New tools, enduring goals, and well-known pitfalls.

How we score rollover recommendations in terms of investment quality, client fit, and service value.

Equity investors have both tactical and strategic reasons to combat home country bias and to go global.

How a portfolio construction tool optimizes an investor's financial and nonfinancial goals.

The paper contains data and product information about Morningstar Australia Equity Research Methodology

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.

Unicorns brace for a reset in valuations as funding falls.

The Morningstar Risk Model is a holdings-based model that helps “identify and assess the risk in one’s investments.