MQR Analysis

A new lens to understand the justification behind the Morningstar Quantitative Rating

A Framework that Utilizes the Decision Process of Our Analysts

MQR Analysis illuminates the opinions of the Morningstar Quantitative Rating by translating the data and analytics that are driving the rating into opinion-based text. When investors can access reliable investment research, ratings, and the justification behind it, they will be empowered to spend more time connecting with clients, growing their business, and making more informed investment selection decisions.

Proven Methodologies, Trusted Expertise

Proven Methodologies,
Trusted Expertise

Rely on the independence and expertise of the Morningstar Quantitative Rating and Analyst Rating to conduct comprehensive research for open-ended funds and ETFs.

Depth of Insight and Contextualization

Depth of Insight and Contextualization

Inform comparisons, distill insights, and communicate investment recommendations by accessing context on a fund’s strength, weakness and suitability.

Increased Breadth of Coverage

Increased Breadth of

Screen within an asset class or category, detect trends, and provide the necessary information to help clients aim for stronger investment outcomes.

Build a Better Investment Portfolio

MQR Analysis answers this core investor question at scale: Why does Morningstar think this investment will deliver excess returns, in comparison to its peers, over the long term?

MQR Analysis expands Morningstar's written coverage of managed investments from 4,000 funds to 40,000 funds: a 10x increase in coverage.

Close the Gap Between Complexity and Communication

MQR Analysis Methodology

About the Quantitative Rating: The Quantitative Rating consists of a series of seven individual models working in unison that were designed to provide a best approximation for the Analyst Rating on the global universe of open-end funds and ETFs. Visually, you can think of the estimation as a two-step process. First, we estimate the pillar ratings for each fund, and then we estimate the overall rating. To estimate the pillar ratings, we chose a machine-learning algorithm known as a "random forest" to fit a relationship between the fund’s pillar ratings and its attributes. After the pillar ratings are estimated, we needed to aggregate them into an overall fund rating. To do this, we apply the analyst ratings framework. The result is the Morningstar Quantitative Rating™ for funds.

MQR Analysis generates opinion-based text (not automated text)

We derive analyst-like opinions from data by assigning a pillar score and creating a thesis. Analysts then choose between mental modes that support their thesis.

The opinions of the MQR Analysis are that of the Morningstar Quantitative Rating model. MQR applies analyst-written content wherever possible. With MQR Analysis, the Morningstar Quantitative Rating system offers the same core elements as the Morningstar Analyst Rating, helping investors make sense of what’s driving our quantitatively-derived ratings.

MQR Analysis Performance

Source: Morningstar Quantitative Rating Three-Year Event Study, Data as of Dec 31, 2020.

MQR is a good predictor of excess returns

In short, the Morningstar Quantitative Rating is very effective at predicting future overperformance (or underperformance). In a three-year event study, funds initially rated gold outperformed similar funds during a full market cycle. When MQR does not recommend a fund (negative or neutral), there is a high likelihood of underperforming.

The Morningstar Analyst Rating and The Morningstar Quantitative Rating have a proven track-record of effectively identifying managed investments that will outperform or underperform their peers.

Where to Find MQR Analysis

MQR Analysis is immediately accessible through our software solutions and feeds.

MQR Analysis in Morningstar Direct
Morningstar DirectSM
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MQR Analysis in Morningstar Office
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MQR Analysis in Morningstar Advisor Workstation
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MQR Analysis in Research Feeds
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MQR Analysis on
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What You Should Know

What is the Morningstar Quantitative Rating?

The Morningstar Quantitative Rating is a machine learning model that’s meant to mimic how Morningstar analysts would rate a fund. The system looks at the last five years of our analysts’ ratings decisions alongside the data that was available to those analysts when they made those decisions.

The machine learning model tries to connect the data to the decisions and find characteristics in the data that would predict an analyst's positive or negative rating. In that way, the system produces a rating that’s in most cases harmonious with the rating our analysts would have assigned to the fund.

How can investors use the quantitative rating?

The Morningstar Quantitative Rating can be used in the same way investors use the Morningstar Analyst Rating. They're both forward-looking ratings that are meant to predict whether a fund will outperform or underperform over a market cycle, and both the quantitatively generated rating and the analyst-generated counterpart have shown to be predictive of future performance.

What kind of a track record does the Morningstar Quantitative Rating have? Can I have confidence in the Morningstar Quantitative Rating and recommendations?

The short answer is yes. Before we initially launched the quantitative rating, we back tested it over 15 years of data to ensure it will produce the results we wanted. But real performance data—not just back-tests—are crucial in measuring effectiveness.

To try to determine the effectiveness of the rating, our research team performed an event study, which shows the average performance of funds that receive a rating throughout time. Since equity and fixed income funds have very different return profiles, we compare all results versus a fund’s category average return. We looked at the margin of outperformance among different ratings buckets over various periods: one month, three months, six months, 12 months and 36 months to see whether, on average, a Gold-rated outperformed over a 36-month period and by how much. Over this three-year period, the average Gold-rated fund beat the category by a little over 2 percentage points, whereas a Negative-rated fund on average underperformed by 1.7 percentage points. The rating has done well for investors over the last three years, and we expect it to continue to perform well going forward.

How is MQR Analysis generated?

The analysis is automatically generated, and it is designed to communicate the reasons for, and justifications behind, the rating. MQR Analysis is designed to replicate the style of the reports that Morningstar analysts publish.

How often is the analysis content refreshed?

The content is refreshed monthly.

Where can I find MQR Analysis, and how can investors use it?

The quantitative rating has been live in Morningstar products and on Morningstar quote pages since June 2017. Now when you click on a fund with a quantitative rating (a subscript Q) you will access accompanying written analysis.

MQR Analysis is available across Morningstar software products and feeds.

Learn More About MQR Analysis and Morningstar Research

©2021 Morningstar. All Rights Reserved. Morningstar's Credit Ratings & Research is produced and offered by Morningstar, Inc., which is not registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (“ RSRO”). Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information contained herein is the proprietary property of Morningstar and may not be reproduced, in whole or in part, or used in any manner, without the prior written consent of Morningstar. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869. Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission.