Morningstar Style Box

The Morningstar Style Box™ was introduced in 1992 to help investors and advisors determine the investment style of a fund. The Equity Style Box is a nine-square grid that classifies securities by size along the vertical axis and by value and growth characteristics along the horizontal axis. Different investment styles often have different levels of risk and lead to differences in returns. Therefore, it is crucial that investors understand style and have a tool to measure their style exposure.

For the Fixed-Income Morningstar Style Box, see Fixed-Income Style Box.

Benefits of the Equity Style Box

Morningstar’s equity style methodology uses a “building block,” holdings-based approach that is consistent with Morningstar’s fundamental approach to investing. Style is first determined at the stock level and then those attributes are “rolled up” to determine the overall investment style of a fund or portfolio. This unified framework can link what are often treated as separate processes—stock research, fund research, portfolio assembly, and market monitoring—in the belief that a shared analytical framework will lead to better portfolio construction and fund usage.

Morningstar uses 10 different stock characteristics to measure value and growth, and this produces more accurate and stable stock and portfolio style assignments. Morningstar uses both forward-looking and historical-based components to ensure that information available to active portfolio managers is incorporated in the model. This robust approach to style analysis is a powerful lens for understanding stocks, funds, and portfolios.

The Morningstar Style Box is applicable in all equity markets. A geographic framework ensures that style assignments are relevant to local investors everywhere.

Note: As of March 31, 2004, all U.S. and non-U.S. stocks and portfolios are evaluated under the same style methodology. This methodology was originally introduced in May 2002 for U.S. stocks and portfolios only.

Using the Equity Style Box

In general, a growth-oriented portfolio will hold the stocks of companies that the portfolio manager believes will increase factors such as sales and earnings faster than the rest of the market. A value-oriented portfolio contains mostly stocks the manager thinks are currently undervalued in price and will eventually see their worth recognized by the market. A blend portfolio might be a mix of growth stocks and value stocks, or it may contain stocks that exhibit both characteristics.

The Morningstar Style Box helps investors construct diversified, style-controlled portfolios based on the style characteristics of all the stocks and funds included in that portfolio.


Morningstar generates Style Boxes for stocks and portfolios in-house, using data culled from our internal databases. Style Box assignments for stocks are updated each month. Style Box assignments for portfolios are recalculated whenever Morningstar receives updated holdings for the portfolio.

The Style Box also forms the basis for the style-based Morningstar Categories and market indexes.

For the Pros

The Equity Style Box captures three of the major considerations in equity investing: size, security valuation and security growth. Value and growth are measured separately because they are distinct concepts. A stock’s value orientation reflects the price that investors are willing to pay for some combination of the stock’s anticipated per-share earnings, book value, revenues, cash flow, and dividends. A high price relative to these measures indicates that a stock’s value orientation is weak, but it does not necessarily mean that the stock is growth-oriented. Instead, a stock’s growth orientation is independent of its price and reflects the growth rates of fundamental variables such as earnings, book value, revenues, and cash flow. When neither value nor growth is dominant, stocks are classified as “core” and portfolios are classified as “blend.”

Stock Size Score: Vertical Axis

Rather than using a fixed number of “large cap” or “small cap” stocks, Morningstar uses a flexible system that isn’t adversely affected by overall movements in the market. World equity markets are first divided into seven style zones:

The stocks in each style zone are further subdivided into size groups. Giant-cap stocks are defined as those that account for the top 40% of the capitalization of each style zone; large-cap stocks represent the next 30%; mid-cap stocks represent the next 20%; small-cap stocks represent the next 7% and micro-cap stocks represent the smallest 3%. For value-growth scoring, giant-cap stocks are included with the large-cap group for that style zone, and micro-caps are scored against the small-cap group for that style zone.

Stock Style Score: Horizontal Axis

The scores for a stock’s value and growth characteristics determine its horizontal placement. There are five value factors and five growth factors, listed below:

Value Factors and Weights


Growth Factors and Weights

Forward Looking



Forward Looking


Price-to-projected Earnings*



Long-Term Projected Earnings Growth










Book Value Growth





Sales Growth


Price-to-Cash Flow*



Cash Flow Growth


Dividend Yield



Historical Earnings Growth


* The calculations are done with the yield form of these variables (i.e. with price in the denominator of the fraction).

The five value and five growth characteristics for each individual stock are compared to those of other stocks within the same scoring group (groups based on style zone and size, for example, Europe large-caps). Stocks are then assigned Overall Value and Overall Growth scores based on the ten factors. If either growth or value is dominant, the stock is classified accordingly. If the scores for value and growth are similar in strength, the stock is classified as “core.”

The thresholds between value, core, and growth stocks vary to some degree over time, as the distribution of stock styles changes in each style zone. However, on average, the three stock styles each account for approximately one-third of the total capitalization in each scoring group.

Moving from Individual Stocks to Portfolios

A stock fund or portfolio is an aggregation of individual stocks and its style is determined by the style assignments of the stocks it owns. Style Box assignments for portfolios are based on the asset-weighted average of the style and size scores of the underlying stocks. Few or no portfolios contain only stocks with extreme value-growth orientations, and both value and growth managers often hold core stocks for diversification or other reasons. Therefore, for portfolios, the central column of the Style Box represents the “blend” style (a mixture of growth and value stocks or mostly core stocks).


See Also

Fixed-Income Style Box