Choosing Adjusted Stock Prices for Indicators and Profit Calculations

Summary

A short forum post raises a practical data choice for stock strategies: whether to use prices adjusted for corporate actions when calculating indicators and position profit and loss. The author suggests that adjusted series may be suitable for indicator calculations but can give misleading profit figures if applied directly to a fixed share count. Their example is that buying the same number of shares and experiencing the same percentage rise can produce different calculated returns with pre-adjusted and post-adjusted data.

The post offers a caution rather than a complete method. It does not define the adjustment conventions, work through a numerical example, or explain how to align adjusted prices with actual share quantities and cash flows. It therefore highlights the need to distinguish analytical price series from trade accounting, but does not establish which adjustment should be used in every situation. Readers would need to verify the data provider’s definitions and model corporate actions consistently when measuring indicators and realized portfolio performance.

Key ideas

• The post questions whether adjusted stock prices are appropriate for both indicator calculations and profit accounting.
• It warns that calculations for a fixed share count can differ depending on the adjustment convention.
• It suggests separating the price series used for analysis from the data used to calculate position returns.
• The post does not define adjustment methods or provide a worked example.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.