Morningstar Introduces Global Risk Model to Help Investors Analyze Stocks and Equity Portfolios

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Jul 05, 2016, 10:11 ET

CHICAGO, July 5, 2016 /PRNewswire/ -- Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today introduced its first Global Risk Model with 36 factors across style, sector, region, and currency characteristics to help investors understand an investment's factor exposures and to forecast the future return distribution of individual stocks and equity portfolios. The company plans to eventually expand the risk model to additional asset classes.

Morningstar's Global Risk Model has 36 different factors that help decompose the sources of return and risk for a stock or a portfolio. Six of the 36 factors are based on Morningstar's proprietary ratings: Quantitative Fair Value Estimate, Morningstar® Quantitative Economic Moat™ Rating, Quantitative Uncertainty Rating, Quantitative Financial Health, Ownership Risk, and Ownership Popularity. A list of all 36 factors in Morningstar's Global Risk Model is available here.

"Risk analysis is paramount to the investment decision-making process. Our model uses unique factors such as sustainable competitive advantage and ownership data to provide a powerful lens with which to understand the risk of a stock or portfolio. In addition, our risk model methodology incorporates 'fat tails,' or extreme events, among investment returns when forecasting the distribution of future returns, instead of relying on a normal distribution," Warren Miller, head of asset management software for Morningstar, said. "Investors can use the risk model to research securities and construct portfolios to make more informed investment decisions about risk and suitability, at a more granular level."

The model evaluates more than 40,000 stocks and 10,000 equity fund portfolios in Morningstar's database and then builds a comprehensive forecast of future returns for various time horizons based on all 36 factor exposures. In addition, the Global Risk Model can assess an equity portion of a client's multiasset portfolio. Investors can screen individual stocks or equity funds or make comparisons based on any of the factors. Morningstar updates the factor exposures and forecasts daily.

Morningstar's Warren Miller and Lee Davidson, head of quantitative research, will host a webinar about the new Global Risk Model on Thursday, July 14 at 1 p.m. CT; to register, please click here.

"Our new risk model is part of our continuing commitment to deliver more value to investors through our flagship web-based platform. The model will enable clients to perform more of their workflow within a single piece of software, providing significant efficiency gains," Miller said.

The Global Risk Model and related data points are initially available in Morningstar Direct^SM, the company's web-based global investment analysis platform for institutional investors. The company plans to add the risk model and related factors to its data feeds later this year. More information, including a fact sheet and related methodologies, is available at http://global.morningstar.com/GlobalRiskModelPressKit.

Morningstar provides data on approximately 40,000 stocks globally, as of March 31, 2016.

About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. Morningstar provides data on approximately 525,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on nearly 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement and management as of March 31, 2016. The company has operations in 27 countries.

The forecasts, projections, or other information generated by the Global Risk Model are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Results from the Global Risk Model may vary with each use and over time. The assumptions, forecasts, and projections used within the Global Risk Model are based on a statistical analysis of historical data. Future returns may be different and in some cases significantly different than what is used within the Global Risk Model. All investing is subject to risk, including possible loss of principal. Past performance does not guarantee future results. There is no guarantee that any particular asset allocation or mix of securities will perform as intended.

Media Contacts:
Nadine Youssef, +1 312-696-6601 or [email protected]
Mary Kenefake, +1 312-348-3089 or [email protected]

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SOURCE Morningstar, Inc.