| That's quite a response! It sounds as if the authors of the paper would have done well to verify some of their factual assumptions with Morningstar prior to publication. Some key points from the response: On the apparent discrepancy between Morningstar's data and self-reported data: > Because Morningstar’s proprietary methodology for calculating Average Credit Quality particularly penalizes unrated holdings by assigning them a low rating (B or BB), it is not surprising that the authors would find Morningstar’s calculated data to produce a lower average credit quality than self-reported data. When we control for not-rated holdings, we do not find a similar pattern. How category classification is assigned: > Throughout the paper, the authors conflate where a fund lands in the Fixed-Income Style Box with its Morningstar Category. In reality, Morningstar’s Fixed-Income Style Box assignment and Morningstar Categories are distinct. Morningstar does not use a fund’s Morningstar Fixed-Income Style Box assignment to determine its category classification. How star rating is assigned: > A fund’s star rating is calculated based on past performance relative to peers in its Morningstar Category – rather than relative to funds that share its Fixed-Income Style Box placement, as described above. |