Executive Summary
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Rating of the past performance of securities is considered crucial by investors when they make investment decisions.
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Several rating methods are used in the financial literature and by the investing community to rate the performance of securities.
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Performance is considered to be in some way predictable, and prediction is based on past performance.
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This article empirically assesses the rating of exchange-traded funds (ETFs) and prediction of their performance.
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The methods examined are the Morningstar rating process, the excess return, the Sharpe ratio, and the Treynor ratio.
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The empirical results reveal a high consistency among the rating methods and a sufficient level of predictability of ETF performance.
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ETF performance is persistent over the short term.
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