How to calculate adj price on ex div day

 

this might sound real boring for people... i gave the details how the adjustments are done as well as why it is done this way.

 

ex div day is the day after which owner of the stock no longer receives dividend (stocks settle on t+2 day); to calculate adj price post div payment day, ALL historical prices are adjusted by a multiplier (a ratio): 

 

multiplier = price on ex div day-1 / (price on the ex div day-1 + div).

 

note:

1 for the immediate dividend, the adjustment is EQUIVALENT TO deducting the amount of dividend from the ex div 4 PM EST close price.

2 for prices on earlier days, the downward adjustments thru ratio will be slightly smaller then deducting the amount of dividend ;

3 note each time a new dividend is paid, EVERY SINGLE historical adjusted price will be adjusted AGAIN.

4 why not just deducting dividend amount from ALL historical price? if you do that, the some earlier earlier price will become negative. Also the % return will be inconsistent with actual % returns

5 the multplier approach maintains correct day-to-day % return.

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for one's historical backtesting, you can just assume you can buy and sell at daily adj price. no need to use daily EOD close price.

Just my 2c

所有跟帖： 

• ex-div has no adjustment, the day before get adjusted -slow_quick- ♂ (56 bytes) () 01/17/2024 postreply 12:05:11

• on that day, ALL daily prices prior to ex div get adjusted -njrookie- ♂ (202 bytes) () 01/17/2024 postreply 12:07:53

• you probably didn't notice, yahoo finance is slightly diff -slow_quick- ♂ (283 bytes) () 01/17/2024 postreply 12:28:47

• that difference is too tiny to be remotely relevant... -njrookie- ♂ (0 bytes) () 01/17/2024 postreply 12:33:58

• strictly speaking, the day you can reinvest dividend is... -njrookie- ♂ (245 bytes) () 01/17/2024 postreply 13:14:47

• Almost there… -slow_quick- ♂ (199 bytes) () 01/17/2024 postreply 16:16:03