I am backtesting a number of trading strategies using a feed of unadjusted data from Factset. Before I run the backtest my routines adjust the data for splits and for special dividends.
One question that has come up is should I also be adjusting the data for dividends as well? So far I have seen 3 arguments:
- Yes you should adjust.
- No you shouldn't adjust as technical analysis algorithms will be using incorrect data.
- You shouldn't adjust while generating opening and closing positions but should adjust for working out total return
I'd be grateful for any thoughts on the matter.