ie: if the benchmark is set to SPY, do those dividends get reinvested in SPY on the payment date to produce a compounded benchmark index?
Thanks,
Simon.
Does the benchmark reflect reinvested dividends of the benchmark security?
Short answer - yes.
I knew we re-invested dividends in the default benchmark. But your question made me wonder if did so for custom benchmarks. A quick test shows that we do. In the attached backtest you can can see the benchmark beating the algorithm because the algo doesn't re-invest the dividends. But if you comment out the "if" statement and rebalance daily, the algo and benchmark end up with the same returns.
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Hi Dan,
Does the benchmark computation suffer from the reported dividend computation bug (https://www.quantopian.com/posts/the-dividend-calculation-looks-very-wrong) or not? If the benchmark splits over the backtest period and pays regular dividends, will it be correct?
Grant
The computation of the benchmark hypothetically would be affected by the computation bug. But I believe SPY has no splits since 2002, so I think the point is moot for any backtest using the default benchmark. If you benchmarked against something like AAPL, the benchmark would be affected.
Disclaimer
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.
SPY's recent dividend yield has been ~2%. Dan kindly posted a backtest just above which you can use to investigate how this difference compounds.
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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.