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 paper studies a variety of asset allocation issues associated with deferred variable annuities with guaranteed minimum withdrawal benefits for life (VA+GMWB) with the goal of developing a framework for the construction of optimal retirement portfoli

This document describes the rationale for, and the formulas and procedures used, to calculate the Morningstar Hedge Fund Operational Risk Flags.

The idea of an economic moat refers to how likely companies are to keep competitors at bay for an extended period. Morningstar calculates an average economic moat score for mutual funds by using the economic moat ratings assigned to the fund’s stock hold

This article discusses the level of overlap among style index providers, and the implications for investors using style-based indexes. It explores the differences in performance within style families and the serious ramifications for investors’ portfolio

In August 2017, Morningstar will begin calculating many of its category percentile ranks and category averages using fractional weighting.

After another market crash, advisors question whether Modern Portfolio Theory is the best way to tackle asset allocation. We asked two experts to debate its merits.

This document describes the rationale for, and the formulas and procedures used in, calculating the Morningstar Rating™ (star rating) for funds domiciled or available for sale in Europe, Hong Kong, Singapore, Taiwan, and the United States.The Morningstar

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.

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