Research Library
The Morningstar Rating for Funds: Analyzing the Performance of the Star Rating Globally
By Jeffrey Ptak, Lee Davidson | 10 November 2016
In this paper, Morningstar examines the efficacy of the Morningstar Rating for funds, popularly known as the star rating, on its ability to predict risk-adjusted fund returns. Morningstar designed the rating as an achievement test not unlike grading a student, and our analysts have consistently used it as such in their published analyses of funds. In practice, however, the rating has been used to identify funds that fund selectors expect to perform well in the future. Using two robust statistical methods, we found that the star rating had some moderate predictive power during our sample period.
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