How Corporate Actions Affect Historical Stock Price and Volume Data

Summary

The document explains why historical share prices in a data series may appear inconsistent with prices remembered from the time. Data vendors may adjust prices and possibly volumes for corporate actions such as stock splits. A split changes the number of shares represented by a historical price, so adjusted series can express past prices on a basis comparable with the shares held today.

The answer suggests that the cited IBM history may not apply all earlier split adjustments, pointing to several past split dates as evidence. This means unusually high older prices can reflect incomplete adjustments rather than inflation-adjusted market prices. The discussion is brief and concerns one vendor's series for one company; it does not establish the accuracy of every historical observation or explain other adjustment types, such as dividends. Researchers should check a provider's adjustment methodology and corporate-action records before using historical price or volume data in comparisons or backtests.

Key ideas

• Stock splits change the share basis and can require adjustments to historical price and volume series.
• Adjusted prices make observations more comparable with the shares represented today.
• Missing split adjustments can leave older prices unusually high in a vendor's history.
• Verify corporate-action adjustments before using price data for analysis or backtesting.

Tags

# Why is Yahoo finance's historical prices so high


# Why is Yahoo finance's historical prices so high












Why is Yahoo finance's historical prices so high. For example, IBM's prices in the 70s are in the $300 range. I know that there are some errors in this data, but this a trend in many of their charts. What is this price reflect? I'm sure it's not the market price in 70s dollars. Is this also an error in data before they started collecting it or does it take into account of splits or something else?

https://www.quandl.com/data/YAHOO/IBM-IBM-International-Business-Machines

## Answer by Kiwiakos (score 2)

https://quant.stackexchange.com/a/32671

Prices (and potentially volumes) have been adjusted for historical corporate actions. For example, if there was a 10:1 split in the past, then todays share is equivalent to 1/10th of a share before the split. This is the correct way to view price/volume time series.

Here it seems that corporate adjustments before a point were not applied. When you look at the IBM splits, you can see that the split in '66, '68, '73 and '79 have not been applied in Yahoo finance. http://www.ibm.com/investor/pdf/ibm_ir_stock_splits_2008.pdf

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