split detection

[jero3n]

hi, this is my first post here

i am doing some research on a very large database of eod stock data (OHCLV), however data are unadjusted for stock splits

just wondering if there is a relatively safe and clever way to automatically detect and smooth splits, so to reduce noise in my data.

thanks

 

[RichardDale]

There's no good way of programatically detecting all splits. Obviously if you see a 50% or 33% reduction in price you can infer that there was a split. But there are other corporate actions not so easy to spot.... such as:
1 for 20 bonus issue aka 5% stock dividend = 0.95 adjustment factor
Spinoff of company - spinoffs should be adjusted according to the value of the spun off company. This is never usually a nice round number.
Special dividends - should be adjusted for, but again not usually a nice round number (eg. Microsoft's special dividend of $3 in November 2004, representing a 0.8998998998999 dilution factor)

The only safe way is to investigate using a data vendor that performs these dilutions for you automatically.

You might also want to consider the issue of survivorship bias too.

 

[jero3n]

Thank you Richard for your prompt reply.

I am not (yet) a trader. Playing with mathematics & nonlinear models is one of my hobbies so my trading knowledge is very elementary.

Indeed detecting *all* splits & dividends is out of the question. However, sometimes there is no need to have *perfect* data to do some statistics. "Some" noise is always acceptable, which (ideally) should be eliminated by the regression model as exceptional behavior.

How often do dividends & spin offs appear in a symbol history and how much noise do they introduce into the historical data?

On the other hand reducing noise is always a good thing, and my thought is that it shouldnt be so difficult to detect extreme behavior in the historical data if you already know the statistical distribution of stock movement and split ratios.

I just wanted to know if someone else did something similar before me, so not to rediscover the wheel.

Thanks a lot
Yiannis

 

[RichardDale]

How often are there dividends and splits? Well, that depends upon the company.

Here's some stats for you:
Since 1950, GE has had:
6 splits
2 stock dividends
2 special dividends
237 cash dividends

Microsoft since listing in 1986:
9 stock splits
1 special dividend
60 cash dividends

Citigroup:
7 stock splits
2 spinoffs
90 cash dividends

Top quality data vendors do this for you so your system development isn't plagued by undetectable erroneous results.