Ptak noted that the Wall Street Journal actually “corroborated” Morningstar’s assertions that its star ratings were predictive. The newspaper’s analysis found that four- and five-star mutual funds were less likely to be merged or liquidated than funds receiving a lower rating. Four- and five-star funds were also significantly more likely to retain a high rating after the next 10 years of performance.
For example, the Journal reported, 69 percent of one-star rated funds were merged or liquidated within 10 years of their rating, as opposed to 22 percent of five-star funds.Thirty-five percent of five-star funds retained a rating of four or five stars after 10 years, according to the Journal; only 5 percent of one-star funds had achieved a rating of four or five stars after 10 years.