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Hi All
Not sure if this falls under the Main topics of
discussion so will place this under off topic.
I trade Australian stocks and use AB for backtesting
ideas.
Once a month I check all capital reconstructions:
dilutions and consolidations and make sure these are
applied, because I do not want these to affect my
backtesting results.
I have mixed thoughts about applying the dividends
adjustments, the renounceable and non renounceable
issues and capital distributions etc, and am looking
for your thoughts and ideas on the subject.
For dividends and distributions, if I own the stock
then when the price goes ex dividend and the price
falls by around the same amount then I have not really
lost anything, because if I owned the stock I would
receive the dividend. But it seems to me that from a
backtesting point of view if I have that data adjusted
then the price fall will be less likely to generate a
sell signal. If I leave the data unadjusted then the
price fall may well generate a sell signal, and would
affect the backtesting results.
But what if I use price rises in the run up to the ex
dividend date as exit signals? Then when the data is
adjusted the usual price rise in the run up to the ex
dividend date may not show up as a sell signal and
this too would affect results.
And what if I were to base a trading system on stocks
that were outperforming the Index over a period of 3
to 6 months and then had a significant fall, as
frequently happens when stocks go ex-dividend, for a
set up and potential entry? If I keep all my data
adjusted for these events then the trading system
would not pick up these price falls or entry
opportunities.
In addition: in keeping ones database up to date then
one removes stocks that are no longer trading. How
significantly could this affect a backtesting system?
Should I keep two databases: one absolutely raw with
no reconstructions and deletions applied, and one up
to date with current prices only?
Has anyone tried this and does this make much
difference to backtesting results?
Regards
ChrisB
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