Our last session focused on two common measures of risk-adjusted performance: alpha and the Sharpe ratio. But as we pointed out, both of those figures need a context to be useful. Who can say whether an alpha of 0.7 is good? Or whether a Sharpe ratio of 1.3 is good?
That's where Morningstar's proprietary fund rating, often called the star rating, comes in. Unlike alpha and the Sharpe ratio, the Morningstar Rating for Funds puts data into context, making it more intuitive. You can find a fund's Morningstar Rating on its Morningstar fund report.
What Is the Star Rating? >>