Adjusting Stock Prices for Splits and Dividends

# Daily returns using adjusted close


# Daily returns using adjusted close












I want to chart the daily returns of a stock, and I'm using Yahoo finance data to download historic data. I was told to use Adjusted Close, but there seems to be an issue with this.

For ANTO.L, you can see that on 19 Jun 2006 there was a 5:1 split. The adjusted close reflected this, and went from 71.97 to 365.36. This of course skews my daily returns, as it represents a 400%+ return!

Should I be using adjusted close to calculate returns? It makes sense when considering dividends, but whenever there is a stock split there is then a huge skew. Is there something else I'm missing that I need to look into?

EDIT:

I think there's lots of examples of the same bad calculations. SRP.L shows the same for example. Problem is the Close is wrong, and the AdjClose is wrong, so I can't trust anything. Can anyone point me towards a good reliable free (or reasonably priced) provider of historic stock data, so I can use for comparisons?

## Answer by chrisaycock (score 9, accepted)

https://quant.stackexchange.com/a/7217

Hmm, this table looks wrong. Here's what it should look like. After the most recent corporate action, the Close and Adjusted Close should be the same; only prices from before the most recent action should have a different Adjusted Close. Here's another example. I think Yahoo just has the wrong information.

If you wanted to derive your own adjustments for calculating returns, you'll need to know the date and nature of every corporate action. Then you'll fake the prices of the future rather than the prices of the past. Ie, you'll add back dividends and undo splits going forward. This is the opposite of what Yahoo is doing in their table; the reason for adjusting closes in the future is to prevent negative prices, which can happen if you subtract dividends from the values in the past. Once you have the adjusted prices, you can compute your returns without worry.

## Answer by Matt Wolf (score 12)

https://quant.stackexchange.com/a/7219

Concerning adjusted price series:

- Free yourself from terminology and definitions, as you can clearly see, Yahoo Finance got it wrong on the stock split you linked to (and as chrisaycock correctly pointed out). You need to focus on the problem not the term people use to describe the problem: You need to adjust time series for the stock split, period. So, it does not matter whether the standard terminology is to use "adjusted price", "split adjusted price", or just "price" (some price adjustment converters in fact backward-adjust and thus the splits are reflected in the pure "price" columns rather than in any "adjusted price" column. (of course here in this example Yahoo is inconsistent which is incorrect).

- The standard (still now) for adjusting price time series for corporate actions is still backward adjustment not forward adjustment. Forward adjustment benefits you if you have past prices locked in for some reason and cannot adjust those but need to preserve the true price changes going forward, however, it suffers from couple other deficiencies in comparison to backward adjustment.

- You need to be extremely careful adjusting prices for dividends. If you are exposed to the discontinuous price differential due to dividend payments but you are not the holder of the stock on the ex-date of the dividend announcement then you will not benefit from any dividend payments but you are still fully exposed to the price adjustment.(I am just making the point here and am not saying this is possible or impossible, what I try is to sharpen your sense of segregating different issues here). Thus, you ought to not adjust the price time series, otherwise you will manipulate your true returns. If you are being paid dividends then yes, you should adjust the price series. For that very reason professionals who really work with historical time series do not adjust time series at all, they keep a special schedule of corporate actions and attach corporate action codes to them and thus they can later adjust price time series on the fly depending on the exact circumstances they find themselves in. Adjusting a price time series for good and storing such data is a very suboptimal exercise imho.

## Answer by jack (score -1)

https://quant.stackexchange.com/a/33535

yahoo only gives the corp actions but no price backwards adjustments for dividends and split adjustments was done wrong