For funds:
The bear-market rank details how an investment has performed during bear markets. Morningstar adds performance during each bear-market month to reach a total bear-market return. Based on these returns, a percentile rank is assigned within a group (stock funds, bond funds, etc). The highest (or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100. For stock funds, a bear market is defined as all months in the past five years that the S&P 500 lost more than 3%; for bond funds, it's all months in the past five years that the Lehman Brothers Aggregate Bond index lost more than 1%. Stock funds are ranked separately from bond funds.
For stocks:
To determine the ranking, Morningstar compares a stock against its peers in the same 2-digit SIC industry code. We add the stock's performance during each bear market month over the trailing five years to reach a cumulative bear-market return. Based on these returns, stocks are then assigned a decile ranking where the 10% of stocks with the worst performance receive a ranking of 10. The 10% of stocks with the best performance receive a ranking of 1. Because Morningstar employs the trailing five-year time period for this statistic, only stocks with five years of history are given a bear-market ranking.