Morningstar Mutual Fund Measures and Selection Model
Journal of Wealth Management, Vol. 17, No. 2, pp. 19-30, Fall 2014
12 Pages Posted: 1 Aug 2014 Last revised: 11 Mar 2016
Date Written: July 30, 2014
First, this study reviews Morningstar analytical grading measures used by investors to choose mutual funds. These measures include Morningstar star ratings, analyst ratings, total pillar ratings, upside and downside capture ratios, and stewardship ratings. Second, the study provides results of research that assesses the effectiveness of Morningstar fund grading measures. Third, a model is proposed that systematically applies selected Morningstar measures to ease investor choice of equity funds. In this case, the model is applied to Vanguard domestic actively managed equity funds, less sector funds. The effectiveness of this model is best tested using future performance of the selected Vanguard domestic actively managed equity funds over three-, five-, and 10-year periods.
Keywords: mutual funds, wealth management, Morningstar, grading measures, star ratings, analyst ratings, total pillar ratings, capture ratios. Vanguard funds, selection model
JEL Classification: G2, G23K, G28
Suggested Citation: Suggested Citation