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The problem, besides the fact that the reported volume gets totally
absurd is that MOST, not all, data vendors keep prices with 2 or 3
decimal digits of accuracy which is fine until they split. A $128 /
share stock after it's split 2 for 1 7 times is $1 / share but still
only reporting 2 decimal digit accuracy on the adjust prices which in
essence means every move up or down in price to the adjusted price
prior to any split is a minimum of 1%. This presents a totally
different and inaccurate picture to a program analyzing price
movements. If you think my example above is extreme then take a look
at the price history for ORCL. You'll see that it has split enough
times over the last 10-12 years that a 0.01 price move back in the
days prior to these splits now amounts to about 13-14%. This is
hardly a lone or isolated case.
--- In amibroker@xxxxxxxxxxxxxxx, "mrdavis9" <mrdavis9@xxxx> wrote:
> This is my first look at the subject of adjusted vs unadjusted
prices. I assumed a historical starting point of 100 shares selling
at $100 per share. This computes to $10,000.00 starting capital.
>
> After one split, I calculated a price of $50 per share,200 shares,
$10,000 capital.
>
> After the second split, I got a price of $25 per share,400
shares,$10,000 capital.
>
> After the third split, I got a price of $12.5 per share, 800
shares,$10,000 capital.
>
> After the forth split, I got a price of $6.25 per share, 1,600
shares, and $10,000 capital.
>
> After the fifth split, I got a price of $3.125 per share, 3,200
shares, and $10,000 capital.
>
> After the sixth split, I got a price of $1.56 per share, 6,400
shares, and $10,000 capital.
>
> If you carry this forward for a few more splits, the price will
become very
small.
>
> Apparently, calculations using very small prices are more likely to
result in incorrect results.
>
> Is this the reason that back adjusted prices are suspect, or are
there other reasons?
>
> I would like to hear comments regarding my conjecture here. Ron D
>
>
>
> ----- Original Message -----
> From: Ken Close
> To: AmiBroker List
> Sent: Thursday, September 11, 2003 9:31 AM
> Subject: [amibroker] Unusual Happening with Adjusted Prices
>
>
> Chuck Rademacher has often mentioned the perils of adjusted price
data
> and he keeps unadjusted prices (close price only I think) in his
> extensive database.
>
> I came upon something just now that illuminates his comments.
>
> I have a Stochastics RSI indicator from Chas Richards Headsup
file and
> it is:
>
> Low1=LLV(C,21);
> High1=HHV(C,21);
> RSISTO=(EMA(100*(C - Low1)/(High1 - Low1+0.0001),13)/2) +
> (RSIa(C,14)/2);
>
> I plot this in IB and do an explore using it and some other
factors.
>
> Today, TARO popped up on my explore as a buy, and when I looked
at my
> collection of plotted indicators, RSISTO was "Empty" (flat line).
>
> After some detective work, I discovered that back in 1990, the
adjusted
> close prices produced a situation where the Low1 = the High1 in
the
> above equation, giving it a empty value that never corrected
itself.
> The 0.0001 factor in the above equation was NOT in my original
equation,
> but will serve to avoid division by zero.
>
> A further explore showed this to be the only stock in a 1700+
symbol
> watchlist, but nonetheless, it might occur on some other symbol
and
> points out the lack of credibility (or lack thereof) of adjusted
prices
> that drop down into the pennies level.
>
> Just for your information.....
>
> Ken
>
>
>
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