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| | Research: Investment Research Tools and Services Offered to Members | |
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The charting module at AAII.com is from Prophet Financial Systems (www.prophet.net). Prophet, like some other charting services, adjusts its historical stock and mutual fund data downward to reflect dividends and fund distributions. As a result, if you were to compare a long-term chart from AAII.com of a dividend-paying stock or a mutual fund with large periodic distributions, you will see that the chart levels going back several years are lower than charts from other services that do not downward-adjust its historical data (BigCharts.com, etc.). Depending on a company's dividend payments, this difference can be significant over long periods.
Another site that also downward-adjusts its charts for dividends and distributions is StockCharts.com. According to the StockCharts Web site, they adjust their data in this manner because they feel they are "providing a truer picture of how the security actually performed over time."
The StockCharts Web site likens its downward adjusting of price data to the adjustments one would make to a stock chart for a stock split. If you buy a stock at $50 and it rises to $100 and then splits, a price chart would not show a large drop in price. Instead, the price is downward adjusted to reflect the new price and the increased number of shares you now have.
It is StockChart's opinion that dividend- and distribution-adjusted charts are best for technical analysis. Using this rationale, and seeing that Prophet's focus is charting and technical analysis, it is perhaps understandable why they downward-adjust their chart data.
While a chart that has been adjusted for dividends or distributions do not reflect the historical prices at which you could have bought and sold the security, it does reflect the equivalent prices at which it traded. Such adjustments allow you to track more accurately price performance over time.
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