Expert: Tad Borek Date: 5/5/2008 Subject: Stock Split
Question Hello:
I was looking into a stock, and was wondering if I'm doing the right calculations. I wanted to make a spread sheet of all the closing prices from that stock since 1981. And then I took the closing price from that same date only ten years later. I wanted to see the how much it went up, with how much percent. My question is since the stock split a few times in these years how do I calculate the real price. Since that 1 stock for e.g. after the split is now 2 or 3 times the closing price.
Answer Hi Abe-
The answer depends on what you're using for a data source. Two examples:
If you're looking it up in newspaper archives, meaning imaged copies of stock tables in old newspapers, you'd need to research all the corporate events that happened during the period and manually adjust the price data. Not just stock splits, but also check to see if there were any spin-offs of subsidiaries or similar reorganizations. An extreme example is "old" AT&T which has turned into shares in a long list of companies. This could get very complicated!
If you're using one of the many data services that feed data to financial web sites, the service should adjust for all stock splits and corporate events along the way. So you could just rely on the stated prices to determine the percentage change in price over the period. The only way to know is to research the data source you're using -- confirm both the adjustments for splits (which is typical) and reorganizations (which sometimes results in a loss of "old" price data -- the historical quote won't go back very far in time).
Keep in mind that the prices you see won't typically include the dividends. For some stocks, that means you're seeing only a small portion of the total return over the period, especially if you reinvested your dividends. It's not easy to find data on the total return of individual stocks factoring in dividends, but you might be able to find it through Morningstar, or the Investor Relations group at the company in question -- start with the company's web site.
