Benchmark and SPY
Benchmark != SPY
Question 1) Are benchmark, SPY or any other instrument based on closing prices or adjusted closing prices?
If Benchmark is based on SPY they are apparently not calculated the same because:
If you run a backtest where:
you buy SPY on day 1 and hold it, the values of Benchmark and SPY are not equal.
Hi Doug,
Good point and this was noticed by other people in the community as well. I completely agree with you that the benchmark needs to be updated to incorporate SPY dividends and hopefully later to allow for customizable benchmarks.
Let me point you to this thread for more information: Question Regarding the Benchmark. Specifically, see Dan's response below:
Great thread, thank you for starting it.
This wasn't a choice that we made with a great deal of thought. The
original thought was "We need a benchmark. People have different
needs, so we should let them choose their own benchmark. But we don't
have a benchmark-chooser feature yet, so let's go with a simple
obvious benchmark. SPY sounds good, right?" And so the choice was
made. We didn't really consider the SPY dividends or how to apply
them.You've definitely convinced me that our choice had deeper implications
than I realized. I agree, we should be using a total-returns value for
our benchmark.I think our path going forward probably has three parts. First is to
label what we have better, which should mitigate the problem for now.
The second part is to make the benchmark configurable per algorithm,
so people can choose the right benchmark for their algo. The third
part is to make the default benchmark a smarter choice, like a
total-return S&P 500, rather than a price return. I don't have a
timeframe on that right now - I need to do some spec work, estimation,
and adjust our roadmap.
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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.
In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.
