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In real life, when you hold a stock across its ex-dividend date, you lose the dividend amount on the open of the next trading day, but then get paid back in a few weeks when the dividend is issued.
If imported data is NOT dividend-adjusted but DOES include each specific dividend event (as an ex-dividend date and an amount per share), RealTest will model the real-world dividend process correctly. The trade list will show the correct as-traded prices, and the dividend credit (or debit for a short position) will be shown in its own column. (However, there is no knowledge of the payment date – the dividend value is applied to equity as of the date the trade closes.)
If imported data IS dividend-adjusted, there will be no visibility of dividends in the trade list, but the net profit of the test will be the same as in the above scenario. This is because in dividend-adjusted data, dividend amounts are not subtracted from price on ex-dividend day, so it’s as if the dividend was neither subtracted nor paid back.
If imported data is not dividend-adjusted and there is no dividend list, then backtest results will be slightly pessimistic vs. reality for longs, and slightly optimistic for shorts, depending on the type of strategy.
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