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b,
Did you see my post to Chuck? The dividend yield numbers that I cited
were *per annum*. Not to mention that if you have an actual trade on,
you'll *never* be stopped out due to a dividend adjustment because (in
the U.S. at least) your stops will be *automatically* adjusted. In my
trading, this "issue" has been a non-issue.
--- In amibroker@xxxxxxxxxxxxxxx, b <b519b@xxxx> wrote:
> --- Chuck Rademacher <chuck_rademacher@xxxx> wrote:
> > As I mentioned in one of my earlier posts, there aren't enough AB
users who
> > appreciate the problem and are prepared to do the work to
eliminate it.
>
> Conclusion:
>
> Perhaps it is based on my own limited experience, but I am more
concerned about
> removing bias caused by survivorship (ignoring inactives) and by
splits (using
> adjusted prices in filters and ranking formulas).
>
> My (untested) hypothesis is that, in most cases, including/excluding
dividends may
> make a difference, but not enough of one to make a good system look
bad (or a bad
> system look good). It might, however, affect results enough to lead
one to pick a
> good system over a better system.
>
> Thus, ideally, one would like to use data that includes dividends. I
will explore
> what form that data might take in another post.
>
> Detailed Reasoning:
>
> What follows is a bit of thinking out loud to clarify my own
understanding. It might
> also help others get a handle on the issue. Here is my expanded list
of possible
> problems that might arise for long (and short) systems using data
that ignores
> dividends:
>
> 1. Entry problems for long systems: if the system buys beaten down
stocks, a large
> 30% to 50% dividend could drop the price enough to get a false buy
signal. Probable
> result: likely only a loss of opprotunity (could have had money in
another stock)
> since the stock is no more likely to drop further than it is to rise.
>
> 2. Exit problems for long systems: a large dividend and the
resulting price drop
> would likely trigger an early exit. Probable result: an early exit
with a profit,
> and perhaps an opportunity cost if the stock goes up after the
dividend payout.
>
> 3. Exit problems for long systems: a medium dividend (%2-4%) might
also trigger stop
> loss exits but only if the stock had been doing poorly to begin with
(or if the
> system uses very tight stops). Probable result: loss or opportunity
and the
> slippage/commission cost to enter a new trade to replace the stopped
out one.
>
> 4. Profit calculations for long systems: Ignoring dividends would
either not affect
> profit calculations (if there were no dividends during the holding
period) or would
> underestimate profits (because adding the dividends in would
increase the gain).
>
> 5. Profit calculations for long systems with multi-year holding
periods (not likely
> many such investors are reading this board) which happen to mainly
pick dividend
> stocks might so underestimate returns that the system would be
discarded when it
> might have been kept if the data had included dividends.
>
> 6. Short systems might have bigger problems with dividends: Ignoring
dividends in
> testing could underestimate profits since any price drops related to
dividend
> payments would be illusionary. Also a short system that enters on
downside breakouts
> could get, form time to time, a false entry signal.
>
> b
>
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