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Thanks a lot, Chuck, for educating me on "dividends". I thought you were
originally referring to regular quarterly dividends rather than occasional stock
dividends, which are basically fractional splits, spinoffs, divestitures, etc.
Your explanation was lucid and understandable.
Al V.
<BLOCKQUOTE
>
----- Original Message -----
<DIV
>From:
<A title=chuck_rademacher@xxxxxxxxxx
href="">Chuck Rademacher
To: <A title=amibroker@xxxxxxxxxxxxxxx
href="">amibroker@xxxxxxxxxxxxxxx
Sent: Tuesday, January 06, 2004 5:11
PM
Subject: RE: [amibroker] dividend (more
on the subject)
Hi
Al,
<FONT face=Arial color=#0000ff
size=2>
Not
to worry, this is a complex issue.
<FONT face=Arial color=#0000ff
size=2>
Yes,
the price drops on the day that a stock goes ex-dividend and for "normal"
dividends, this is not a problem. When a company floats a piece of
itself, the dividend can be substantial. Twenty, thirty, even
fifty percent fall in price on a given day.
<FONT face=Arial color=#0000ff
size=2>
Now
comes the problem of how your data supplier adjusts the price.
Some data vendors allow you to specify whether or not you want historical
prices to be adjusted for the dividend. Most do
not. If your data is not backadjusted to compensate for the
dividend, you will see a huge collapse in the price on the
ex-date. If your system is in a trade, it will see this price
collapse as a loss. Depending on indicators you use, false signals
can be triggered. It will appear as a large breakout to the
downside, probably triggering stops in your system that should be
triggered. This is not good.
<FONT face=Arial color=#0000ff
size=2>
<FONT face=Arial color=#0000ff
size=2>However, backadjusting that includes dividend adjustments is not good
either. Dividend backadjustments are subtracted from the price (so
that P/L figures are correct) and it is possible to end up with negative
prices in your historical data. Of course, the stock never really
went negative. Just like YHOO or DELL shows backadjusted prices of
ten cents or so due to splits, a stock with a large dividend in its past can
end up with negative prices several years back.
<FONT face=Arial color=#0000ff
size=2>
This
thread started when Art asked about what happened to NCRX on the 2nd of
December. The price collapsed by $11. It was a cash
payout to investors. If you owned the stock, you had $11 cash in
your hand and your stock lost $11. No net change. However,
Art's data vendor DOES NOT adjust for dividends and cash
payouts. So, he sees a huge gap in his chart for NCRX.
If I set a flag on my data to adjust for that dividend,
the backadjusted price hit a low of $2.06 on the 10th of March,
2003. As you can see, if that cash payout happened to be $14
instead of $11, the historical, backadjusted price on the 10th of March would
show a negative value.
<FONT face=Arial color=#0000ff
size=2>
I
hope this helps. It doesn't get any easier trying to explain
it.
<BLOCKQUOTE
>
<FONT face="Times New Roman"
size=2>-----Original Message-----From: Al Venosa
[mailto:advenosa@xxxxxxxxxxxx]Sent: Tuesday, January 06, 2004
4:22 PMTo: amibroker@xxxxxxxxxxxxxxxSubject: Re:
[amibroker] dividend (more on the subject)
Chuck:
I haven't followed this thread very closely, so forgive me if I am
giving the wrong information or am misunderstanding something. I always
thought that when a stock goes ex-dividend, the floor specialist
automatically adjusts the price downwards that day to reflect the per-share
amount of the dividend. The price could still close up on that day if the
supply-demand forces drove it up. So, prices that are downloaded from your
data source should already reflect the dividend adjustment, and you should
not have to worry about that yourself. Thus, prices cannot possibly go
negative. Am I wrong, missing something, or what?
Al Venosa
<BLOCKQUOTE
>
----- Original Message -----
<DIV
>From:
<A title=chuck_rademacher@xxxxxxxxxx
href="">Chuck Rademacher
To: <A
title=amibroker@xxxxxxxxxxxxxxx
href="">amibroker@xxxxxxxxxxxxxxx
Sent: Tuesday, January 06, 2004 1:12
PM
Subject: RE: [amibroker] dividend
(more on the subject)
<FONT face=Arial color=#0000ff
size=2>Hi Dingo,
<FONT face=Arial color=#0000ff
size=2>
<FONT face=Arial color=#0000ff
size=2>Yes, prices can go negative as a result of backadjusting for
dividends because the dividend is subtracted. Although there
is a very logical reason as to why they are subtracted, I simply cannot
come up with the reason at the moment. Perhaps Howard or
someone else can jump in here and help me out? If I can
remember the reason before someone else comes up with it, I'll be back to
you.
<BLOCKQUOTE
>
<FONT face="Times New Roman"
size=2>-----Original Message-----From: dingo
[mailto:dingo@xxxxxxxxxxxx]Sent: Tuesday, January 06, 2004
10:01 AMTo: amibroker@xxxxxxxxxxxxxxxSubject: RE:
[amibroker] dividend (more on the subject)
<FONT face=Arial color=#0000ff
size=2>I'm a little confused by the "prices can go negative" part.
Is this because the dividend is subtracted from the price? Wouldn't a
"better" solution be if you did a "percentage" calculation somewhat like
a split?
<FONT face=Arial color=#0000ff
size=2>
<FONT face=Arial color=#0000ff
size=2>d
<FONT
face=Tahoma size=2>-----Original Message-----From: Chuck
Rademacher [mailto:chuck_rademacher@xxxxxxxxxx] Sent:
Tuesday, January 06, 2004 4:04 AMTo:
amibroker@xxxxxxxxxxxxxxxSubject: RE: [amibroker] dividend
(more on the subject)
<FONT face=Arial color=#0000ff
size=2>G'day, b...
<FONT face=Arial color=#0000ff
size=2>
<FONT face=Arial color=#0000ff
size=2>Another country heard from on the subject of
dividends!
<FONT face=Arial color=#0000ff
size=2>
<FONT face=Arial color=#0000ff
size=2>IMO, the BIG dividends could be considered to be
rare. However, a dividend of 10%, while not BIG, can still
affect the P/L and indicator calculations. Sometimes a
company will float a division or subsidiary, issuing stock in the new
company and reducing the price of the original stock by the same
amount. It is not unusual to see 50% falls in price
arising from situations like this. I could run some stats
for you, if you feel it is important to know that much about the scale
of the problem.
<FONT face=Arial color=#0000ff
size=2>
<FONT face=Arial color=#0000ff
size=2>I would hope that TJ might think this subject is important
enough to give some consideration. In order for that to
happen, enough users would have to:
<FONT face=Arial color=#0000ff
size=2>
<FONT face=Arial color=#0000ff
size=2>a. understand the problem.
<FONT face=Arial color=#0000ff
size=2>b. believe that it is serious enough that it should be
fixed
<FONT face=Arial color=#0000ff
size=2>c. convey that message to TJ.
<FONT face=Arial color=#0000ff
size=2>
<FONT face=Arial color=#0000ff
size=2>If TJ was to address the problem, there still is the issue of
how the information gets into the database. I hate to
bring up CSI again, for fear that users here will soon think that I
have some sort of financial interest in the company. I can
assure you that I cannot benefit in any way by people subscribing to
CSI.
<FONT face=Arial color=#0000ff
size=2>
<FONT face=Arial color=#0000ff
size=2>With that (hopefully) out of the way, let me describe how my
own trading software works. By the way, my software is not
for sale, so there is no potential conflict in tellying you about
it.
<FONT face=Arial color=#0000ff
size=2>
<FONT face=Arial color=#0000ff
size=2>My database, thanks to CSI, has a record of every dividend and
dividend date. This information is available directly from
CSI. In fact, with CSI you can backadjust your data to include
or exclude dividends. Obviously, the difference is
the amount of the dividend. Backadjusting for
dividends, however, creates a new problem; prices can go negative when
backadjusting over several years. My method of
getting around this problem is to backadjust over a moving window that
is large enough to properly calculate the indicators being used by the
system. Since my database has dividend dates and amounts,
I am able to do this backadjusting on the fly. Yes, it
slows things down. No, I don't turn the feature "on"
during preliminary research of new system(s) and/or
parameter(s). I only turn it on in the later stages of my
research in order to get an accurate picture.
<FONT face=Arial color=#0000ff
size=2>
<FONT face=Arial color=#0000ff
size=2>I hope that the above helps people to understand the
significance of the problem. I don't recall it every being
mentioned on this or any other Yahoo board. I can assure
you, however, that the subject takes up a lot of my time and
effort.
<BLOCKQUOTE
>
<FONT face="Times New Roman"
size=2>-----Original Message-----From: b
[mailto:b519b@xxxxxxxxx]Sent: Tuesday, January 06, 2004
1:59 AMTo: amibroker@xxxxxxxxxxxxxxxSubject:
RE: [amibroker] dividend (more on the
subject)Chuck,I am convinced.
Dividends are bad news. And with recent US tax changes they will
notbe going away anytime soon. Are the big dividend
payouts rare enough that they can be ignored in practice? I
hope the answer is Yes, because I can not see any easy way to
compensate (otherthan manually checking all trade candidates for
recent dividends - too much tediouswork for my liking.)
b--- Chuck Rademacher
<chuck_rademacher@xxxxxxxxxx> wrote:> Another reason
why I say that dividends are the BIGGEST PROBLEM with data
is> that not only did $11 disappear in one day from the stock
in question> (causing a loss), it also severely distorts ALL
technical indicators. Such> a move could look
like a SERIOUS BREAKOUT when, in fact, it's nothing but a>
dividend.> -----Original
Message-----> From: indiana0352
[mailto:cs_winn@xxxxxxxxxxx]> Sent: Monday,
January 05, 2004 9:34 PM> To:
amibroker@xxxxxxxxxxxxxxx> Subject: [amibroker]
dividend> > > Does anyone know how
I can compensate for large dividend payments>
made by companies in the stock prices in AB??>
> eh NCRX which paid out a $10.92 cash
dividend on Dec 2, shows in AB> as dropping
significantly that day when really it didn't.>
> The only way I could firgure it out would be to
do a reverse> division and calculate a split
value which I enter. Is there an> easier
way?> > TIA,>
Chris> > > > Send BUG
REPORTS to bugs@xxxxxxxxxxxxx> Send SUGGESTIONS
to suggest@xxxxxxxxxxxxx>
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