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.

In this paper, we share the results of empirical testing with indexes of various sizes and different constraint scenarios to better understand how these settings affect the performance of the five algorithms in terms of tracking error and running time.

A rotation in Morningstar factor index leadership demonstrates how momentum investing can stumble amid market reversals.

New tools, enduring goals, and well-known pitfalls.

How we score rollover recommendations in terms of investment quality, client fit, and service value.

Equity investors have both tactical and strategic reasons to combat home country bias and to go global.

How a portfolio construction tool optimizes an investor's financial and nonfinancial goals.

The paper contains data and product information about Morningstar Australia Equity Research Methodology

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.

Unicorns brace for a reset in valuations as funding falls.

The Morningstar Risk Model is a holdings-based model that helps “identify and assess the risk in one’s investments.

Article 9 fund downgrades dwindle to a trickle and are likely over.

Morningstar ESG Commitment Level has supplemented our ratings work with a distinct, qualitative, analyst-driven evaluation of asset managers from an environmental, social, and governance perspective.

Green bond funds maintain the lead, while social and sustainability bond products find their footing.

Investment performance in 2023 continues to both surprise us and upend the conventional wisdom.

Europe leads the way in ESG practices, along with Hong Kong. The U.S. has healthy Carbon Metrics, but some companies' controversies lower its total score.

What motivates an investor to fire their financial advisor?

A look at how key asset classes performed in 2022, how correlations have changed, and the implications for portfolio building.

The Low Carbon Designation is an indicator that the companies held in a portfolio are in general alignment with the transition to a low-carbon economy.

ESG risk helps explain Meta's style migration and index inclusion.

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An in-depth look at the trends and forces reshaping U.S. Retirement Plans.

The portfolio carbon risk metrics aim to help investors identify, quantify, and manage climate-related investment risks, while the percentile and absolute ranks are intended to support informed investment decisions by allowing for comparison of carbon-re

This document provides details on the methodology underlying the suitability framework in the Morningstar Risk Profiler.

The Morningstar Portfolio Risk Score is designed to help assess whether the riskiness of the portfolio matches the risk profile of an investor.

A study of various definitions of the value factor in investing.

Screening for dividend durability can help equity-income investors avoid yield traps.

Funds with intentional and unintentional exposure to digital assets.

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Since 2017, Morningstar Investment Adviser India has been publishing an annual report on women fund managers in the asset-management industry. We attempt to acknowledge the presence and highlight the achievements of women in this space and share a perspe

This paper explains an alternative utility-based dynamic asset allocation algorithm that does not require expected returns.

Practical guidelines for time horizon and position size.

Asset managers need to ensure corporate lobbying practices align with ESG statements.