Re dividends,
Trading systems are designed to improve stock investment profitability through stock trading.
The purpose of a system is to create an advantage for the trader over the result that a long-term investor would obtain. The long term investor earns the price increase of his stock over the investment period plus the income from all dividends. The trader is lucky to get some dividends.
That hints right away that the value of a trading system is measured by how much more the trader can earn over stock price increases plus dividends.
Imagine a newbie trading system designer who makes his first attempt at a trading system and he tests it using SPY, and he does a 10-yr test, and he chooses dates when SPY starts and ends at the same price.
He runs the system for the first time and it shows he made 22% over that period. He thinks that, well, that's not too bad because SPY didn't go anywhere in price but he'd sure like to do better. What he forgot is that the long-term holder also got 22% via his dividends.
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I think I wrote something incorrectly in my earlier post regarding stock price adjustment on a dividend date. Without reading it again I think I might have written that stock bid/ask is increased on that date to compensate. That's not true, its decreased. That's prior to Open. After the opening, the market does what it does. I think that over the last few years I've started to have more brain farts.
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