Rating a Robo-Rater

17 Pages Posted: 20 Apr 2020

See all articles by David Nanigian

David Nanigian

San Diego State University - Fowler College of Business - Finance Department

Date Written: December 31, 2019


Since 2011, Morningstar has issued Morningstar Analyst Ratings on many of the largest mutual funds in the USA. In June 2017, Morningstar launched the Morningstar Quantitative Rating™ to provide a forward-looking rating on all mutual funds. Morningstar uses a “robo-rater” machine-learning model to assign Morningstar Quantitative Ratings. However, the “robo-rater” cannot utilize the complete set of information available to Morningstar’s analyst as it cannot process “soft information”. The purpose of this study is to evaluate if and how this “robo-rater” is conducive to mutual fund selection. I find that the only value of the “robo-rater” is in its assessment of mutual fund expenses and that its inability to process “soft information” makes the Morningstar Quantitative Rating™ much less useful than the Morningstar Analyst Rating™.

Keywords: FinTech, Mutual fund fees, Mutual fund performance, Mutual fund ratings, Robo-advising, Soft information

JEL Classification: G11, G23, G24

Suggested Citation

Nanigian, David, Rating a Robo-Rater (December 31, 2019). Available at SSRN: https://ssrn.com/abstract=3580986 or http://dx.doi.org/10.2139/ssrn.3580986

David Nanigian (Contact Author)

San Diego State University - Fowler College of Business - Finance Department ( email )

5500 Campanile Drive
San Diego, CA 92182-8236
United States
213-545-1036 (Phone)

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