How Are Stock Splits Reflected In CHARTS?
Q: I Didn't know anybody in the United States had ever produced a chart book that stupid. It's a swindler's tool, promoting the fraud that you ran past us a few days ago of "stocks regain their highs" so as to generate uncomprehending purchases at the "lower price" post split.
A:
That it was trading at $90 just before the 3 for 1 split and that
the presplit prices have been adjusted to reflect the split. The
chart winds up comparing current shares with the equivalent of
current shares, instead of the fiction of current shares versus
the prior situation of the equivalent of three current shares.
In my database I
factor that makes the line continuous.
So, after a 2 for 1 split, I multiply all the prices for the stock in
the database prior to the split by 1/2.
Some places don't bother doing this, and you see the broken line.
Sometimes on Yahoo you will notice that they haven't gotten around to
doing it right after a split.
Trading volume can also be adjusted by multiplying volumes prior to
the split by the inverse of the factor used in the split correction.
That is a little less common.
Well, I and everybody that I know, which is a considerable percent
of the trading population, have been doing it that way for the more
than 42 years that I've been trading stocks. We kind of like being
able to compare current shares with the equivalent of current
shares to get an idea of how things are actually moving, rather
than getting all het up about nonsense of the 1 x $350 = 10 x $35
paper shuffling variety.