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I agree. Ron D
----- Original Message -----
From: "quanttrader714" <quanttrader714@xxxxxxxxx>
To: <amibroker@xxxxxxxxxxxxxxx>
Sent: Thursday, January 08, 2004 6:22 PM
Subject: [amibroker] Re: dividend (more on the subject)
> Chuck, understand but I raise "the other side of the coin" for two
> reasons. First, because I saw an implication in one post that others
> should jump on this bandwagon and convince Tomasz to implement it and
> I feel that would be a colossal waste of his limited time. And
> second, because I see folks getting too spun up about what I believe
> is a very minor issue... for private traders anyway although they
> should be aware of it for their due diligence. You're more than that
> so I see where you're coming from but felt we needed some balance.
>
>
> --- In amibroker@xxxxxxxxxxxxxxx, "Chuck Rademacher"
> <chuck_rademacher@x> wrote:
> > Mark,
> >
> > That's actually the problem. You'll "never" get stopped out in live
> > trading, but your system doesn't know about dividends when it is
> > backtesting. It only knows about a fall in price. It can distort
> > indicators, trigger stops or just about any other possibility over a
> > backtest window.
> >
> > I agree that we are talking small problems. But, when backtesting
> a small
> > number of trades, even one can distort the results.
> > -----Original Message-----
> > From: quanttrader714 [mailto:quanttrader714@x...]
> > Sent: Thursday, January 08, 2004 6:15 PM
> > To: amibroker@xxxxxxxxxxxxxxx
> > Subject: [amibroker] Re: dividend (more on the subject)
> >
> >
> > 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@x> 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
> > >
> > > __________________________________
> > > Do you Yahoo!?
> > > Yahoo! Hotjobs: Enter the "Signing Bonus" Sweepstakes
> > > http://hotjobs.sweepstakes.yahoo.com/signingbonus
> >
> >
> >
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> >
> >
> >
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