As a frame of reference between January 2003 and January 2016, S&P 500 total return was 112.497%. But why is the backtesting says that the benchmark's total return is 166%. It looks like the research is showing correctly around 112%.
Really interesting .
http://dqydj.net/sp-500-return-calculator/
says that the total return during the period was 112%
Then
https://www.dividendchannel.com/drip-returns-calculator/
says that the total return during the same period is 166%...
What is going on?
Unless research's SPY is adjusted for survivor bias, something is wrong. I mean I invested only SPY whole time and the backtesting says that the return ties to the benchmark. But when I come to the research there is a big difference.
I also have an issue.
The research platform from the look of things aren't taking into account transaction costs I think.
The returns showed are much higher than in the back test.
I was really expecting someone from Quantopian to respond to this, because this shouldn't have happened.
Guys, relax; it's the difference between the simple price return and the dividend-reinvested total return.
EDIT: hmm hang on, maybe you are onto something.
EDIT2: nope, that's it - just the difference between reinvesting dividends in the index or not.
Hi Simon,
I think the problem is deeper than that. Because I invested only in SPY with leverage 1. Then in the backtesting, naturally, the benchmark and my portfolio are on top of each other. But in research my portfolio is the same as the backtesting result, but benchmark is much lower. I thought it was standard to look at everything in terms of the total return. Otherwise all of the high dividend paying equity investment look a lot worse. So why inconsistency between research and backtesting platform?
Hi Ujae,
Simon is correct here. Can you share your algo that invested in SPY in backtesting so I can take a look?
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Jamie,
It is a very simple algo that invested 100% in SPY once over the last 13 years didn't do anything. All I did is to run it in backtesting and then looked at it again in the Research platform. I am sorry but I am at work right now and I won't have time until this weekend to code again, because I erased the algo after testing it (lately, my algos has been getting too many and I have been deleting what I won't keep). Let me know if you still want me to reproduce it this weekend. I am sure you will get the same result if you did it yourself.
Aren't all of our personal algo portfolios assume dividend/capital gains reinvested in the research platform?
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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.