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I have been debating this with myself for some time now as to what is
better for me. What to include/exclude in the data regarding
adjustments. Unfortunately I have not come to any decision.
Some has been discussed before on this forum about keeping or removing
dead stocks. I think in the end it comes to personal preference and
how things fit to how you trade.
On Sat, 22 Jan 2005 21:01:51 -0800 (PST), kris45mar <kris45mar@xxxxxxxxx> wrote:
>
> 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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--
Cheers
Graham
http://e-wire.net.au/~eb_kavan/
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