An investment factor is a characteristic that drives investment risk and return. The Morningstar Factor Profile identifies seven factors: style, yield, momentum, quality, volatility, liquidity, and size.
What is an investment factor?
Created in 1992, the Morningstar Style Box was the first attempt at measuring stock factors: size (small-, mid-, and large-capitalization) and style (value, blend, growth). Since then, more investment factors have emerged as meaningful indicators of stock performance.
In 2019, Morningstar created the Factor Profile, which analyzes a fund’s underlying holding through seven different investment factors. It looks back on three time periods: the trailing one-, three-, and five-year periods. The Factor Profile compares fund factor data to its Morningstar category average and Morningstar category index.