Introduced in 1992, the Morningstar Equity Style Box was designed to help investors and advisors determine the style orientation of stocks and the investment style of funds. Nearly 30 years later it continues to be valuable tool used to analyze investment style.
Morningstar is keeping the core principles, and is making the following changes to the methodology:
- Sourcing the Morningstar Equity Style Box Inputs from Morningstar Equity Database using trailing twelve-month data instead of using annual report financial data. This allows Morningstar to utilize more timely and accurate equity data.
- Removing the Development Status Market-Capitalization buffer to make the size calculation simpler by reverting to market convention.
- Updating the Factor Bucketing Calculation with a straightforward statistical approach, allowing a cleaner way to assign individual factor scores to stocks, resulting in more even distributions.
- Replacing the aggregation of factor scores with a smoother distribution, to provide investors end scores that are less biased to outliers.
Credit: Morningstar, Inc., 2020
Use of the new methodology will be automatic and users will see value changes within the following feeds and products:
- Licensed Data Feeds
- Morningstar Data Services
- Global Equity Data Feeds
- Morningstar Fund API Center
- Morningstar Equity API Center
- Morningstar Essentials
For additional information, Morningstar has more resources available:
Credit for all information and resources: Morningstar, Inc., 2020