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.

The Morningstar Rating™ for exchange-traded funds uses the same methodology as Morningstar Rating for funds. Ratings are based on risk-adjusted returns for the three-, five-, and 10-year time periods, and then the overall rating is a weighed average of t

The Morningstar Rating™ is a quantitative assessment of a fund's past performance--both return and risk--as measured from one to five stars. It uses focused comparison groups to better measure fund manager skill.

This document addresses the Morningstar estimated performance methodology.

This document details the methodology for the Morningstar Total Return Index, calculated at the fund level and representing the value over time of one share purchased and owned since inception, assuming all dividends and distributions are reinvested.

Morningstar created extended performance statistics to "fill in the gap" between the inception date of a new share class or distribution channel and the inception date of the original portfolio. Morningstar will display extended performance under two cir

This survey measures the experiences of mutual fund investors in 22 countries in North America, Europe, Asia, and Africa. Aiming to promote best practices for investors, we rated companies across four categories—Regulation and Taxation, Disclosure, Fees

The financial crisis of 2008 has led many investors to search for tools that minimize downside risk. In our study, we explore one of the promising alternatives to mean-variance optimization (MVO) that incorporates non-normal return distributions—mean-con

This paper addresses the methodology behind Morningstar's procedure for assigning absolute ranks, the formula for percentile ranks, and the assigning of fractional ranks.