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Morningstar Risk-Adjusted Return (MRAR)
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Morningstar Risk-Adjusted Return (MRAR)
The Morningstar Return measure rates a fund's performance relative to other funds in its fund category. 

 

D E F I N I T I O N

MRAR is a measure of a fund's annualized historical excess return (excess is measured relative to risk-free investment in Canadian Government Treasury Bills) adjusted for the fund's historical volatility. The exact formula for MRAR is

Where rt is the monthly excess return, i.e. [(1+fund return)/(1+T-Bill return)-1] X 100 and is a constant risk tolerance parameter. Morningstar's analysts have concluded that = 2 results in fund rankings that are consistent with the risk tolerances of typical retail investors. MRAR is calculated for t = 36, 60, and 120 months depending on the length of performance history available for a fund.