Morningstar Factor Profile includes seven factors that are widely accepted in the industry as key drivers of risk and return.

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Morningstar Factor Profile Methodology

Factor Definitions

Style – The style factor describes the aggregate expectations of market participants for the future growth and required rate of return for a stock, based on the same measures used for the Morningstar Style Box. A higher exposure to the style factor indicates higher growth.

Yield – The yield factor describes the dividend and buyback yield of a company, based on the trailing 12 months. A higher exposure to the yield factor indicates higher yield for investors.

Momentum (Mom.) – The momentum factor describes how much a stock has risen in price over the past year relative to other stocks, calculated by subtracting the trailing 1-month return from the trailing 12-month return. A higher exposure to the momentum factor indicates the company has performed well recently.

Quality – The quality factor describes the profitability and financial leverage of a company, based on an equally weighted mix of trailing 12-month return on equity and debt-to-capital ratios. A higher exposure to the quality factor indicates a higher quality of the firm.

Volatility (Vola.) – The volatility factor describes the maximum observed spread in long-term returns, based on the trailing 12-month standard deviation of daily returns. A higher exposure to the volatility factor indicates larger variation in long-run outcomes.

Liquidity – The liquidity factor describes the trading frequency of a company, based on trailing 30-day share turnover. A higher exposure to the liquidity factor indicates higher share turnover.

Size – The size factor describes the market capitalization of a company, based on the same measure used for the Morningstar Style Box. A higher exposure to the size factor indicates smaller market capitalization (though we plot large-cap exposure at the top of the size capsule to simplify the Factor Profile visual and keep all “high” or “large” indicators aligned at the top).