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JOURNAL OF ACCOUNTING AND FINANCE
Investing in Morningstar Five-Star Stock Upgrades: Price and Style Effects
Author(s): Paul J. Bolster, Emery A. Trahan
Citation: Paul J. Bolster, Emery A. Trahan, (2013) "Investing in Morningstar Five-Star Stock Upgrades: Price and Style Effects," Journal of Accounting and Finance, Vol. 13, Iss. 6, pp. 193 - 208
Article Type: Research paper
Publisher: North American Business Press
Abstract:
We study the impact of buy recommendations derived from Morningstar 5-Star stock upgrades. Our
results show that Morningstar’s recommendations follow a sudden abnormal decline in stock price and
do not impact share prices of the companies mentioned. The upgrades are followed by a persistent
positive abnormal return. Returns for a portfolio of Morningstar recommendations are significantly
above the market return, but are not statistically different from zero when adjusted for risk. Factor
analysis suggests that these returns are driven by beta exposure, smaller stocks, and negative momentum
effects. Overall performance is average after adjusting for factor exposures.
