Going for Gold: An Analysis of Morningstar Analyst Ratings

Management Science, Forthcoming

40 Pages Posted: 4 Apr 2014 Last revised: 2 Aug 2017

See all articles by Will J. Armstrong

Will J. Armstrong

Texas Tech University - Area of Finance

Egemen Genc

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM)

Marno Verbeek

Erasmus University - Rotterdam School of Management; Erasmus Research Institute of Management (ERIM); Netspar

Date Written: June 28, 2017

Abstract

We investigate Morningstar’s new qualitative, forward-looking analyst ratings, which reflect independent analysts’ expectations of a fund’s future performance. We find relatively higher flows to funds receiving higher ratings, suggesting that the average investor values the analyst’s subjective views when allocating their wealth. Performance tests show that investors would have earned significantly higher returns over our sample period by investing in funds with the highest analyst conviction. These results suggest that independent research that expands the information set to include qualitative elements may help investors make better investment allocation decisions.

Keywords: mutual funds, Morningstar, fund flows, fund performance, event-study

JEL Classification: G00, G11, G14, G20

Suggested Citation

Armstrong, Will J. and Genc, Egemen and Verbeek, Marno, Going for Gold: An Analysis of Morningstar Analyst Ratings (June 28, 2017). Management Science, Forthcoming . Available at SSRN: https://ssrn.com/abstract=2419669 or http://dx.doi.org/10.2139/ssrn.2419669

Will J. Armstrong

Texas Tech University - Area of Finance ( email )

Lubbock, TX 79409
United States

Egemen Genc

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands

Marno Verbeek (Contact Author)

Erasmus University - Rotterdam School of Management ( email )

P.O. Box 1738
Room T09-53
3000 DR Rotterdam
Netherlands
+31 10 408 2790 (Phone)

HOME PAGE: http://www.rsm.nl/mverbeek

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Netspar

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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