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 the impact of liability-driven investing on asset allocation policy with an emphasis on U.S commercial real estate and Non-U.S. commercial real estate allocations. This study consists of two parts – a historical analysis and a forward-

Morningstar undertook an initiative to incorporate the effect of short positions and derivatives in a portfolio's descriptive statistics. This involved recalculating current and historical portfolio statistics to better capture the exposures provided by

Traditional, long-only commodity indexes only tell half the story. Why a momentum-based long/short approach makes a better benchmark.

Although MVO is widely accepted in academic and finance circles as the golden standard for developing asset allocations, its effectiveness in retirement-income planning is inherently limited. To more effectively evaluate the risk-reward trade-off of reti

Morningstar has been building its own hedge fund database since 2004, and acquired other hedge fund databases along the way. Although hedge funds present certain challenges because they are not subject to regulation, we have the necessary expertise in tr

This paper promotes an enhanced understanding of human capital's role in the market portfolio, and how liability-driven investing is relevant for individuals. Providing a rich theoretical framework, it answers how and why equity-bond glide paths, as well

The Morningstar® 1000SM Hedge Fund Index is a rules-based, equal-weighted, non-investable index designed to capture the performance and behavior of the hedge fund universe in as representative a fashion as possible.