How Dividend Adjustments Affect Vendor Total Return Calculations
Summary
The document compares monthly total returns from several financial data vendors and asks why their figures can differ. Its worked example focuses on a stock with a cash dividend: one calculation compounds the price moves before and after the ex-dividend date and includes the dividend in the return for that date. This illustrates how a gross total return index can represent dividend reinvestment across the month.
A second approach adjusts the historical price using a dividend factor, then computes the ex-date return from adjusted prices. The example produces a nearby but different monthly result, showing why dividend-adjusted price fields should not automatically be treated as equivalent to a vendor’s total return index. The response addresses one stock and one dividend event; it does not establish which vendor’s methodology matches a particular benchmark, explain fund return differences, or resolve every discrepancy. Vendor definitions, event handling, currency conversion, and rounding may need further investigation for other securities and dates.
Key ideas
- Monthly total return can combine price changes with cash dividends on the ex-dividend date.
- Dividend adjusted prices may apply a factor that differs from direct total return index calculations.
- The worked example shows that the methods can yield slightly different monthly returns.
- A single stock example cannot explain all differences across vendors, funds, securities, or dates.
Tags
Full text
# comparing total returns from various data vendors
# comparing total returns from various data vendors
I need to use various data sources to cover all of my data, and I am concerned by the discrepancies in total returns. Data vendors were helpful, but their simple documentation did not help resolve why there can be differences for some months for some ISINs but not for other months. If you are familiar with these issues, please comment on the example data points below.
I am calculating calendar-month returns (in Swedish Kronen) via
- TOT_RETURN_INDEX_GROSS_DVDS from Bloomberg (taking the ratio of consecutive month-end values),
- RI of ThomsonReuters Datastream (again, a ratio),
- FG_TOTAL_RETURNC of FactSet (directly),
- Month End Return of Morningstar (directly),
I would love to see consistent returns, comparable to what MSCI bases their total return indices on. Which vendor corresponds to this?
I think all vendors promised to assume all reinvestments of dividends and capital distribution for this data (though for funds fees and costs might still change things). Meanwhile for
H&M stock (HENNES & MAURITZ B) in April 2000, I see
For an SEB Sverige fund, a difference shows up in June 2000: .0304632 from Bloomberg and .0494242 from Morningstar.
And the fact that sometimes Morningstar produces lower numbers, sometimes higher numbers, and for equities, not stocks, does not suggest a definitional issue about reinvesting or paying dividends, e.g.
For Ericssson stock (ERICSSON (LM) B): Nov 2000: BB: -.1390977; TR DS: -.1390979; FS: -.13909775; MS: -.0912699 but Sept 2001:BB: -.2431374; TR DS: -.2431377; FS: -.2431372; MS: -.2873786; Oct 2001: BB: .1968915; TR DS: .1968912; FS: .1968913; MS: .2588556.
## Answer by assylias (score 3)
https://quant.stackexchange.com/a/25148
The best way to answer the question is to look at the data. For example, on H&M in April 2000:
```
Close Price Div
31/03 240
13/04 236
14/04 225 1.35
28/04 238
```
ThomsonReuters, Bloomberg and Factset do the following calculation for the return (+/- rounding):
```
r = 236/240 * (225 + 1.35)/236 * 238/225 - 1
= -0.24%
```
This is the value I get from Bloomberg using the `TOT_RETURN_INDEX_GROSS_DVDS` field so I'm not sure how you obtained the -0,27%.
You may have got your number from using the `PX_LAST` field adjusted for dividends. It is calculated based on an adjustment factor for the dividend:
```
f = 1 - 1.35/236
= 0.9942797
```
They then adjust the return on the ex-date by that factor:
```
r = 236/240 * 225/(236*f) * 238/225 - 1
= -0.26%
```
which is close to the number you got.Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.