The adjusted closing price corrects the raw closing price so that it reflects all corporate actions that happened on or before that date. When a company pays a dividend, executes a stock split, or issues a distribution, these actions affect the value of each share. The adjusted price includes these changes so analysts can compare prices accurately across time.
Without this adjustment, the stock’s historical chart could look misleading. For example, a stock split may make the price appear to drop even though the company’s total value has not changed. By adjusting for these events, the price history becomes consistent and easier to interpret.
Investors use adjusted closing prices to measure true performance, calculate returns, and run models that require clean, comparable historical data. It provides a clearer picture of how a stock has actually behaved over long periods.
Adjusted closing prices allow for accurate performance analysis by removing distortions caused by dividends, splits, and other corporate actions. They are essential for research, backtesting, and any long-term comparison of stock prices.
It is calculated by taking the regular closing price and adjusting it for dividends, stock splits, and other corporate actions. The goal is to show what the price would have been if these events were reflected directly in the share value.
Analysts use adjusted prices because they provide cleaner historical data. Events like splits or dividends can distort raw prices, so adjustments allow for accurate comparisons and performance measurements.
A company performs a 2-for-1 stock split. The regular closing price drops from $200 to $100, even though the company’s overall value stays the same. The adjusted closing price reflects this change, showing a consistent price history that accounts for the split.
