An adjusted price is a historical price series transformed to account for specified corporate actions, such as stock splits and, depending on the convention, dividends or other distributions.
How it works
A split changes the number of shares and quoted price without creating the same economic gain or loss implied by the raw price jump. Adjustment factors restate earlier observations so the series can be compared consistently under a declared convention.
Different vendors may provide raw close, split-adjusted close, or total-return-style adjusted fields. The exact methodology and effective dates must be documented rather than inferred from the column name alone.
Why it matters
Using an unadjusted series in a return calculation can create artificial jumps that a strategy mistakes for real market moves, producing impossible backtest profits or losses.
Adjustment is only one data-quality dimension; timestamps, missing bars, stale quotes, symbol changes, and units also need validation.
A simple market example
A 10-for-1 split can make a raw price appear to fall from 120 to 12 overnight. Without the correct adjustment, a backtest may treat that mechanical change as a roughly 90% crash.
Common mistakes
Assuming every field named adjusted close uses the same methodology.
Mixing adjusted and unadjusted fields inside one calculation.
Frequently asked questions
Does adjusted price equal total return?
Not always. Some series adjust only for splits while others also account for dividends; check the provider methodology.
Should live orders use adjusted prices?
Execution uses actual tradable market prices; adjusted series are mainly an analytical representation of history.
Can bad adjustment create fake alpha?
Yes. Corporate-action errors can create large artificial returns and signals.
Educational content only. Definitions describe common market usage and may vary by jurisdiction, instrument, or institution.