[CoachKandSportsguy]

Published White papers on Investment Topics. Why almost any financial metric can be gamed. . or once something human is measured (polls included), the behaviors of what's being measured changes. . . called "the observer effect".

Just a moment...

Title: "Box Jumping: Portfolio Recompositions to Achieve Higher Morningstar Ratings"

Abstract:
"We show a novel mechanism by which mutual fund managers strategically alter their portfolios to take advantage of investors’ reliance on Morningstar star ratings. Specifically, funds achieve higher ratings by changing their holdings to induce Morningstar to reclassify them into size/value style boxes with lower average performance, thereby enabling more favorable peer comparison. This practice, which we term ‘box jumping’, attracts fund flows and higher fees, despite sacrificing return performance and the ratings upgrades reversing within three years on average. These patterns emerge after 2002 when Morningstar ratings began to be based on relative performance within style boxes, and are predictably absent beforehand. We also show that pervasive box jumping creates negative spillover effects on other funds. Together, our findings highlight portfolio recomposition as a novel and strategic lever that funds use to manipulate Morningstar ratings, and that funds box jump despite compromising returns due to investors’ fixation on ratings when allocating capital."

Keywords: Strategic Behavior, Mutual Fund Benchmarks, Performance Management, Investor Protection, Morningstar