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 paper describes how closed-end fund distributions are factored into the toal return calculations for net asset values and share prices.

The paper defines the Morningstar Categories for the Chile-domiciled funds.

The paper discusses the launching of the enhanced cash breakdown calculation for mutual fund portfolios.

The paper discusses four aspects of ETF analysis: Estimated Holding Costs, Tracking Volatility, Market Impact Cost and Portfolio Concentration.

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

A commonly used measure of return volatility is the standard deviation of monthly returns multiplied by to express it in the same unit as annual return

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

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 Sector Delta is an equilateral triangle that depicts a portfolio’s super sector allocation, relative to a benchmark, on a two dimensional space.

This document supplements the methodology document for the Morningstar Style BoxTM. This provides additional information about how to rescale the size score for a fund

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.

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

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

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

Morningstar’s UIT composite return combines the returns of each series within a strategy to measure how the strategy has performed over different time periods

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 Similar Funds tool will generate a list of investments that are similar to a user-specified offering. This methodology is based upon several factors including the category, special criteria, portfolio allocation, and performance of the fund provided

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

The paper discusses different types of performance returns shown by Morningstar products

The paper details Morningstar's custom yield calculation.

Morningstar Indexes were created to provide investors with accurate benchmarks for performance measurement, as well as offering discrete building blocks for portfolio construction.

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

The Morningstar Categories for funds in the Europe/Asia/Africa universe were first established in the early years of the UCITS (Undertaking for Collective Investment in Transferable Securities) Directive to help investors make meaningful comparisons betw

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

Morningstar Credit Ratings Definitions and Other Related Opinions and Identifiers This document sets forth Morningstar's credit definitions, ratings symbols and other related opinions and identifiers for evaluating the credit risk in structured finance t

Ratings of individual debt instruments may be adjusted up or down from the Consolidated Corporate Rating to take into account the individual security's priority of payment. Priority of payment for an individual debt instrument is determined by its issuer

Morningstar's bank credit rating methodology is based on the same key components, or pillars, as its methodology for nonfinancial corporations: Business Risk, Solvency, Distance to Default, and a bank stress test, which is analogous to the Cash Flow Cush

Quality recommendations for current income and income growth from stocks.

A rational approach to asset allocation.

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.

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 divides countries of the world into 13 different geographic regions, based on equity assets only. The 13 regions can also be folded into three super geographic regions: the Americas, Greater Europe and Greater Asia.

Estimated holding cost, tracking volatility, market impact cost, and portfolio concentration are all data points used in our ETF ratings. In this document, we describe the method of calculation for each of these points.

This document describes the methodology of assigning Morningstar Institutional Categories for portfolios such as mutual funds, exchange-traded funds, and separate-account strategies available for sale in the U.S.

This document addresses the Morningstar estimated performance methodology.

This methodology document addresses the target-date fund series rating and research reports methodology. Morningstar Target-Date Fund Series Ratings and Research Reports are designed to help individual investors, financial advisors, plan sponsors, and ot

Modern Portfolio Theory Statistics (MPT statistics) are based on the Capital Asset Pricing Model (CAPM) of expected returns developed by Nobel laureate William Sharpe and others in the early 1960s. The CAPM is based on Modern Portfolio Theory (MPT) devel

This document is for the investment managers, transfer agents and custodians who send portfolio reports to Morningstar. It covers how portfolio files should be organized in order to ensure that Morningstar can process files in a timely and accurate manne

A rational approach to asset allocation

Investing in the wide-moat stocks of today and tomorrow

Research and recommendations for the serious fund investor.

This document addresses the Morningstar Equity Research performance methodology overview.

Quality recommendations for current income and income growth from stocks.

A rational approach to asset allocation

Investing in the wide-moat stocks of today and tomorrow

Research and recommendations for the serious fund investor

This document sets forth Morningstar's definitions and descriptions of its ratings symbols, ratings outlooks, and surveillance for evaluating the credit risk in structured finance transactions. Morningstar’s determination to review a structured finance t

Morningstar reviews and updates our categories annually. Morningstar categories provide the peer groups that Morningstar ratings are based upon.