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.

Investing in the wide-moat stocks of today and tomorrow

Research and recommendations for the serious fund investor.

Quality recommendations for current income and income growth from stocks.

Russ Kinnel looks at which matters more in the long run, cost or shorter-term performance

Investing in the wide-moat stocks of today and tomorrow

A rational approach to asset allocation.

A guide to the methodology underpinning the fixed income style box for Chilean funds.

A guide to the methodology underpinning the Morningstar Fixed Income style box.

Morningstar asks fund companies to send the following information on a monthly or quarterly basis for each of their fixed income and allocation funds.

Research and recommendations for the serious fund investor.

The calculation logic supporting our fee level for 529 Plans.

Calculation methodology explaining fee level calculation for open markets in Europe, Africa and Asia

An explanation of the policy and calcuations for when an extended performance will be calculated for US funds.

The paper describes how common quantitative Morningstar ranks are determined.

Methodology outlining the calculations of fee level for US Insurance fund group

The calculation logic for fee level scores applicable to Funds and VA subaccounts available to U.S. investors.

A guide to the Morningstar classification system for Fixed Income, cash and cash equivalents. This methodology document addresses the Morningstar global fixed income classification.

This project aims to classify asset types at the detailed level of paper holdings for fixed-income or debt-oriented schemes, as disclosed by asset-management companies in their holding data for such schemes.

Quality recommendations for current income and income growth from stocks.

Research and recommendations for the serious fund investor.

Morningstar's Credit Ratings ("Morningstar") credit rating process builds upon the knowledge of companies, industries, and financial markets that Morningstar has been accumulating for more than a decade. Morningstar’s credit rating methodology is forward

A rational approach to asset allocation.

Investing in the wide-moat stocks of today and tomorrow

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 places fixed income funds in one of the nine squares of the Morningstar Style Box based on each fund’s duration and average credit quality.

Morningstar provides data on individual securities registered in dozens of countries, but researchers evaluating those investments often have a need to study groups of investments as they're branded in a local market.

The paper outlines category definitions applicable to the New Zealand market.

Investors often evaluate how reasonable a stock’s price is by looking at a price ratio, such as price-to-earnings (P/E), price-to-book (P/B), price-to-cash flow (P/C), or price-to-sales (P/S).

Morningstar calculates cash flows in-house on a monthly basis for open-end funds and non-US ETFs and on a daily basis for US ETFs using total net assets and returns for different time periods.

An essential complement to our database of investment information and our suite of quantitative research tools, Morningstar's target-date series analysis focuses on helping fiduciaries make better investment decisions with plan participants' retirement f

The purpose of this document is to explain Morningstar’s policies in regards to Investment securities converting structure and scenarios involving the display of extended performance

Each security in a fund portfolio is assigned a detailed asset classification, known as the Detail Type Id. In September 2011 Morningstar updated the list of Detail Type codes.

Performance attribution analysis consists of comparing a portfolio's performance with that of a benchmark and decomposing the excess return into pieces to explain the impact of various portfolio management decisions.

The paper describes two common risk measures.

Morningstar’s aim is to help investors determine a Listed Investment Companies (LICs) overall investment merit to help them construct diversified portfolios and achieve their goals.

There are multiple ways to define a fund’s inception date for purposes of return and ratings calculations.

The Morningstar Category™ classification system for funds lets institutions, advisers and investors effectively compare like funds.

Numerous academic studies have shown the existence of a momentum effect in stock performance.

The paper discusses the characteristics of virtual share class shares which have no independent legal profile of their own and are identical in all other respects to the base currency class of the fund.

Active Share is a measure designed to determine similarity of holdings between a fund and an index.

In its annual Target-Date Industry Survey, Morningstar shines a sweeping light across target-date funds, which have become a primary tool for Americans’ retirement savings.

The paper details Morningstar's custom yield calculation.

Diversified U.S. equity funds and diversified foreign equity funds are categorized based on the three-year average of the fund’s Style Box coordinates (Raw X Value-Growth Score, Raw Y Size Score).

The Morningstar Category™ classification system for funds lets institutions, advisers and investors effectively compare like funds.

The updated Morningstar Style Box provides an intuitive visual representation of style that helps investors build better portfolios and monitor them more accurately. This methodology document addresses the Morningstar Fixed-Income Style Box™. The Morning

Synthetic ETFs are exchange-traded funds that use over-the-counter derivatives to replicate an index return.

When it comes to the benchmarking of target maturity funds, the cart has been in front of the horse.

The paper outlines Morningstar's equity data definitions.

Morningstar has a rich tradition of holdings-based analysis of mutual funds and other investment portfolios. The portfolio holdings provide insight into the manager’s strategy and help investors determine if an investment might be appropriate for them.

The Morningstar Category™ classification system for funds lets institutions, advisers and investors effectively compare like funds.