Is quantitative and qualitative information relevant for choosing mutual funds?

•Investors use frequently Morningstar Ratings to select mutual funds.•Star Rating and Analyst Rating in isolation have a very limited ability to identify mutual funds that beat their peers.•The combination of Star Rating, Analyst Rating and its Pillars improves the screening of funds. Investors use...

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Bibliographic Details
Published in:Journal of business research 2021-02, Vol.123, p.476-488
Main Authors: Otero-González, Luis, Durán-Santomil, Pablo
Format: Article
Language:English
Subjects:
Morningstar
Mutual funds
Persistence
Ratings
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Summary:•Investors use frequently Morningstar Ratings to select mutual funds.•Star Rating and Analyst Rating in isolation have a very limited ability to identify mutual funds that beat their peers.•The combination of Star Rating, Analyst Rating and its Pillars improves the screening of funds. Investors use ratings to make their investment decisions. In this paper we analyze whether the combination of qualitative and quantitative information allows the mutual funds to be identified that are able to beat their peers’. Our results show just a little evidence when we use ratings in isolation. The selection of mutual funds improves when we choose those with a positive Parent, Process and Price. Finally, the combination of Star (quantitative) and Analyst (qualitative) information as well as their pillars improves the screening of mutual funds.
ISSN:0148-2963
1873-7978
DOI:10.1016/j.jbusres.2020.10.015