What is monthly adjusted closing price?

A stock's adjusted closing price gives you all the information you need to keep an eye on your stock. You can use unadjusted closing prices to calculate returns, but adjusted closing prices save you some time and effort. Adjusted prices are already adjusted for stock dividends, cash dividends and splits, which creates a more accurate return calculation. In today's fast-paced financial environment, adjusted closing prices are an excellent tool for capturing an informative snapshot of the day's activity which can help you refine your strategies over the short term.

Tip

The adjusted closing price of a stock takes into account dividend payments, splits and other factor which directly influence overall return. Comparing the adjusted closing prices for a single stock over a specific duration of time will allow you to identify its return.

Obtain Important Information

Find an online or print resource that offers historical price tables for your stock. Many companies offer historical price data in the investor relations portion of their website, and finance websites also make data available to the public. Download the data for the period of time you're interested in, or enter it manually into a spreadsheet program. You can record close dates at daily, weekly or monthly intervals – whatever works best for your purposes.

Set Up the Data

Most sources will give you a variety of data regarding the stock for each closing date. The only data you really need is the column of dates and a corresponding column for adjusted closing prices. Set up the spreadsheet so that the date and corresponding price are in descending order. For instance, if you're trying to find the monthly stock return from January 2018 to September 2018, list February data below January data.

Find the Return

To calculate a monthly stock return, you'll need to compare the closing price to the month in question to the closing price from the previous month. The formula for percentage return begins by dividing the current month's price by the prior month's price. The number 1 is then subtracted from this result before multiplying the resulting figure by 100 to convert it from decimal to percentage format.

For example, if the January 2018 stock price was $60 and the February price was $67, the return is 11.67 percent [(67/60)-1] * 100. Create a new column labeled "stock return" and perform the calculation for each month.

Perform the Necessary Analysis

Once you've calculated monthly returns, you can continue to analyze and play around with the stock return data. You can find the average return over the time period by summing each stock return and dividing it by the number of months in the time period. You can also find the standard deviation of the monthly returns to see how erratically the stock increases in value. If you own stock in multiple companies, you can use correlation functions and equations to discover how the stocks in your portfolio are correlated.

References

• The Nest: How to Find a Stock Return Using the Adjusted Closing Price
• {'url': 'http://thenumbers.marketplace.org/publicradio/markets', '_id': 'http://thenumbers.marketplace.org/publicradio/markets', 'external_url': 'http://thenumbers.marketplace.org/publicradio/markets'}
• ADJUST | definition in the Cambridge English Dictionary

Resources

• Yahoo! Finance

Writer Bio

Based in San Diego, Calif., Madison Garcia is a writer specializing in business topics. Garcia received her Master of Science in accountancy from San Diego State University.

Figuring out the values of stocks can be more complex than checking their price on any specific day. Stocks have both a "closing price" and an "adjusted closing price." These prices reflect two different ways of determining the value of the stock. The closing price is simply the cash value of that specific piece of stock at day's end while the adjusted closing price reflects the closing price of the stock in relation to other stock attributes. In general, the adjusted closing price is considered to be a more technically accurate reflection of the true value of the stock.

Tip

The closing price of a stock is only its cash value at day's end, whereas the adjusted closing price factors in things like dividends, stock splits and new stock offerings.

Adjusted Closing Price and New Offerings

The adjusted closing price analyzes the stock's dividends, stock splits and new stock offerings to determine an adjusted value. The adjusted closing price reflects the change in stock value caused by new offerings from the corporation. New offerings are when a corporation may choose to offer additional shares of stock, which is often done to raise additional money. These new offerings may be offered as a rights offering, where current shareholders have the first right to purchase the shares at reduced prices or the shares may be offered to the public.

New offerings decrease the value of existing stock because when there are more individual shares, each share represents a smaller amount of the total value. This means that although a stock might close at $50 per share, if the company has issued new offerings, each stock might actually only be worth $40, depending on the number of new stocks offered. The adjusted closing price accounts for the new offerings and the resulting devaluation of each individual stock, and not merely the cash value of the stock at the end of the day.

Assessing Stock Splits

When individual stocks become very expensive, companies can split the stocks into smaller units. These splits, like new offerings, reduce the overall value of each share because the number of total shares increases. While the initial overall value of each individual stock decreases with a stock split, the overall value of the company can actually increase because new investors snatch up the newly reduced stocks and drive the price up.

For example, a company with 10,000 shares of $200 stocks might split the shares in half so there are 20,000 shares. Each of the 20,000 shares is then worth $50. When investors buy up the new $50 stocks because of their perceived good value, the value of each of the $50 stocks might then rise. Adjusted closing price accounts for stock splits, both because of a decrease in value caused by the split itself, and also the subsequent possible increase in value due to the new demand.

Understanding the Effect of Dividends

Dividends are payouts that a company can distribute to shareholders when stocks and profits are appreciating. A company might pay out a dividend as an award of additional shares to a stockholder or as a cash return. While dividends are good for stockholders, they actually decrease the value of each company stock.

The decrease is caused by the fact that paying out dividends reduces the value of the company because they are transferring money or stocks into the hands of shareholders instead of investing it back into the company. Unlike closing price, adjusted closing price reflects devaluation caused by dividend disbursement.

Overall, the adjusted closing price will give you a better idea of the overall value of the stock and help you make informed decisions about buying and selling, while the closing stock price will tell you the exact cash value of a share of stock at the end of the trading day.

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