Key Takeaways
- • Morningstar Australasia director of quantitative research Patrick Caldon explains how the Morningstar Quantitative Equity Rating will complement the firm's Analyst Rating.
- • The quant rating is a machine-learning model that compares a stock's underlying fundamentals with those of firms already rated by Morningstar's analysts, meant to mimic how analysts would rate the security.
- • Ratings follow a five-tier scale: Gold, Silver and Bronze (positive), Neutral, and Negative.
- • Morningstar's quantitative equity ratings have covered more than 12,000 U.S. firms since their introduction in February 2018, according to Morningstar.
Summary
Morningstar Australasia's director of quantitative research, Patrick Caldon, outlines how the Morningstar Quantitative Equity Rating is designed to complement the firm's Analyst Rating. The source article is brief and centers on Caldon's explanation of the product's role within Morningstar's existing rating framework.
According to Morningstar's published methodology, the quantitative rating compares a stock's underlying fundamentals with those of firms rated by Morningstar's analysts. It is described as a machine-learning model intended to mimic how Morningstar's analysts would rate a security if they were covering it. The model's outputs are forward-looking and generated by a statistical model based on analyst-driven inputs, per Morningstar's quantitative equity research report.
Ratings are assigned on a five-tier scale: Gold, Silver and Bronze are the three positive ratings, with Neutral and Negative completing the scale. Morningstar's stock ratings are determined by a stock's current price, its estimate of fair value, and the uncertainty rating attached to that fair value estimate.
Morningstar has said the quantitative rating is an acceptable substitute when its analysts do not cover a security or fund. The firm introduced the quantitative equity ratings in February 2018 and has since extended coverage to more than 12,000 U.S. firms.
According to Morningstar's published methodology, the quantitative rating compares a stock's underlying fundamentals with those of firms rated by Morningstar's analysts. It is described as a machine-learning model intended to mimic how Morningstar's analysts would rate a security if they were covering it. The model's outputs are forward-looking and generated by a statistical model based on analyst-driven inputs, per Morningstar's quantitative equity research report.
Ratings are assigned on a five-tier scale: Gold, Silver and Bronze are the three positive ratings, with Neutral and Negative completing the scale. Morningstar's stock ratings are determined by a stock's current price, its estimate of fair value, and the uncertainty rating attached to that fair value estimate.
Morningstar has said the quantitative rating is an acceptable substitute when its analysts do not cover a security or fund. The firm introduced the quantitative equity ratings in February 2018 and has since extended coverage to more than 12,000 U.S. firms.
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