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Finance Glossary

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Adjusted Closing Price

Definition:

Why would anyone have to adjust anything for a closing price of a stock? You go to Google Finance, type in the ticker and you get a number. That's the closing price, right? Why adjust?

Well, a pickle is not always a pickle - sometimes it's just an old cucumber somebody dropped in salt water. There are corporate actions like dividends, stock splits, and a bunch of other weird hybrid things that companies do to make your life miserably complex.

The closing price then gets adjusted to reflect said actions - and we need to favor adjusted historical returns" because without the adjustment, history gets cloudy - a famous example is the one time enormous dividend made by MSFT when Bill Gates retired from the CEO role - if you ignored that huge dividend and just looked at the closing price of MSFT, its returns would have looked less spectacular than they really were.

Guys, hike up your jeans and adjust.

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