The Effectiveness Of Morningstar Rating For Chinese Mutual Funds

Morningstar is one of the major fund rating suppliers of Chinese mutual funds.This thesis analyzed the effectiveness of Morningstar fund rating for the Chinese mutual funds with Morningstar category as china fund aggressive allocation.The thesis first compared the Morningstar's performance measure(MRAR-Morningstar risk adjusted return)with other performance measures like total return,Sharpe ratio,Treynor ratio,Jensen Alpha and then analyzed the stock selection and market timing abilities of five-star funds through T-M model,finally the thesis studied the predictive effect of Morningstar rating by least squares regression.The study shows that Morningstar MRAR and rating mechanism are effective on evaluating the mutual funds' performance;and during 2009 to 2017,there's moderate predictive effect of Morningstar fund rating on future performance.Low ratings from Morningstar generally indicate relatively poor future performance and there's some statistical evidence that Morningstar's highest-rated funds(five-star funds)outperform the lower-rated funds.The predictive effect of MRAR is better than other classic performance measures(Sharpe ratio,Treynor ratio,Total Return and Jensen Alpha).