Handling Corporate Actions in Long-Term Equities

When building quantitative models on historical cash market data, one of the most common pitfalls developers face is the failure to properly account for corporate actions.

1. The Danger of Unadjusted Data

Consider a 2:1 stock split. If a stock closes at ₹1,000 on Monday and opens at ₹500 on Tuesday post-split, an unadjusted dataset records a massive 50% loss. An algorithmic momentum strategy reading this raw data will instantly execute a sell order, misinterpreting a routine corporate action as a catastrophic market event.