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The Morningstar fixed income style box considers risk along two axes, credit and interest rates. I'm curious if the authors considered misreporting of interest
by JackFr 7y ago
The Morningstar fixed income style box considers risk along two axes, credit and interest rates. I'm curious if the authors considered misreporting of interest rate risk. It's interesting because the duration of the portfolio (the measure of exposure to interest rates) is not subject to the whims of ratings bureaus, and it is a straightforward calculation -- and yet Morningstar relies on a survey of the manager to get the portfolio duration.
- MR4D 7y agoIf the PM lies about this to Morningstar, they are in violation of the law. Specifically, I believe that they would fall afoul of FINRA Rule 2210 [0] and SEC Rule 34b-1 [1]. (I run a financial firm, but am not a lawyer, so they may target different rules specifically for the issue of bond duration.) [0] - https://www.finra.org/rules-guidance/rulebooks/finra-rules/2210 https://www.finra.org/rules-guidance/rulebooks/finra-rules/2... [1] - https://www.law.cornell.edu/cfr/text/17/270.34b-1 https://www.law.cornell.edu/cfr/text/17/270.34b-1