Mutual Fund Age and Morningstar Ratings

Morey, Matthew R.

doi:10.2139/ssrn.249948

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Mutual Fund Age and Morningstar Ratings

Lubin School of Business Working Paper

29 Pages Posted: 11 Dec 2000

See all articles by Matthew R. Morey

Matthew R. Morey

Pace University - Lubin School of Business - Department of Finance and Economics

There are 2 versions of this paper

Date Written: November 12, 2000

Abstract

This study investigates the relationship between the age of mutual funds and their Morningstar ratings. Using 37 different Morningstar data disks, we find and document an age bias in the Morningstar ratings. Specifically, we find that funds that are ten years or older systematically receive higher average star ratings than younger funds as a result of a weighting system that makes it more difficult for the star ratings of seasoned funds to decline. Also, similar to Blume (1998), we document that younger funds ratings are more variable than those of older funds. If we are to believe that star ratings affect fund flows, then this relationship of age and ratings is of significance to the mutual fund industry and to investors.

Keywords: Mutual fund ratings, age of funds, Morningstar mutual fund ratings, average ratings

JEL Classification: G20, G21, G23

Suggested Citation: Suggested Citation

Morey, Matthew R., Mutual Fund Age and Morningstar Ratings (November 12, 2000). Lubin School of Business Working Paper, Available at SSRN: https://ssrn.com/abstract=249948 or http://dx.doi.org/10.2139/ssrn.249948