Adjusted Closing Price
The Adjusted Closing Price is the stock's closing price modified to account for corporate actions such as dividends, stock splits, and rights offerings that occur after the trading day. This adjustment provides a more accurate reflection of a stock's historical performance and trends by incorporating the effects of these events. Essentially, the Adjusted Closing Price includes not just the market price on a given day but also all events that impact shareholder equity, making stock prices comparable across different periods.
Definition: Adjusted closing price is the stock's closing price adjusted to reflect the impact of dividends, stock splits, rights offerings, and other corporate actions that occur after the trading day. By considering these corporate actions, the adjusted closing price allows investors to more accurately assess the historical performance and trends of a stock. In simple terms, the adjusted closing price is not just the market price of the day but includes all events that affect shareholder equity, making stock prices comparable over different periods.
Origin: The concept of adjusted closing price originated from the need in financial markets for a method to accurately evaluate the historical performance of stocks. As stock markets evolved, corporate actions like dividends, stock splits, and rights offerings became more common, significantly impacting stock prices. To make historical data comparable, financial analysts and data providers began using adjusted closing prices.
Categories and Characteristics: Adjusted closing prices are mainly divided into two categories: pre-adjusted and post-adjusted.
- Pre-adjusted: Pre-adjusted prices adjust historical prices to the current price level, suitable for analyzing the historical performance of a stock.
- Post-adjusted: Post-adjusted prices adjust the current price to historical price levels, suitable for calculating investment returns.
Specific Cases:
- Case 1: A company had a closing price of 100 yuan on January 1, 2023, and then conducted a 1:2 stock split on June 1, 2023. After the split, the number of shares doubled, and the price halved. To make prices before and after the split comparable, the adjusted closing price adjusts the pre-split price to 50 yuan.
- Case 2: A company had a closing price of 200 yuan on January 1, 2023, and then issued a dividend of 10 yuan per share on June 1, 2023. After the dividend, the stock price typically drops. To reflect the impact of the dividend, the adjusted closing price adjusts the pre-dividend price to 190 yuan.
Common Questions:
- Why is the adjusted closing price needed? The adjusted closing price can eliminate the impact of corporate actions like dividends and stock splits on stock prices, making prices comparable over different periods.
- What is the difference between the adjusted closing price and the actual closing price? The actual closing price is the market price of the stock at the end of the trading day, while the adjusted closing price considers the impact of events like dividends and stock splits.
