corporate action tools, e.g. to forward/backward adjust timeseries on the command line
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README.md

cattle (corporate actions on the command-line)

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A simple library that handles corporate action events and applies them to time series of market prices, outstanding securities and nominal values.

In terms of that library a command-line tool cattle is built that reads ISO15022 mt564 messages, stack them and then apply a time series of corporate action events to a time series of prices, nominal values and outstanding securities.

Cattle is hosted primarily on github:

Pronunciation

cattle is correctly pronounced SEE-AYE-tool.

Red tape

  • no external dependencies
  • licensed under BSD3c
  • contains GPLv2 code by Michael Abbott

Examples

Suppose we're interested in a backadjusted time series of ticker XYZ. Observed market close prices (in GBP) are:

2013-10-01  10.00
2013-10-02  11.00
2013-10-03  12.00
2013-10-04  11.00
2013-10-07  10.00
2013-10-08  10.00
2013-10-09  10.50

We know there was a dividend of GBP 2.00 ex'd on 04 Oct 2013, and another dividend payment ex'd on 07 Oct 2013, also GBP 2.00. The actual mt564-messages are transformed into a JSON-like format; the ex-date is the key column:

2013-10-04  caev=DVCA .nett/GBP="2.00" .xdte="2013-10-04" .payd="2013-10-11"
2013-10-07  caev=DVCA .nett/GBP="2.00" .payd="2013-10-21"

The observed market close prices already account for the corporate action events so daily returns are perfectly explicable when both prices as well as corporate action events are presented side by side.

However, many (if not most) time series analysis tools (and humans alike) will be fooled into thinking that from 04 Oct the prices are falling or stalling; to present the real picture (and hence allow sensible analyses) we have to somehow incorporate the CA events into the close price time series, i.e. as we say adjust the prices for corporate action events.

Suppose the time series is stored, in the syntax above, in a file XYZ.tser, the corporate action events in XYZ.echs:

$ cattle apply XYZ.tser XYZ.echs
2013-10-01  6.00
2013-10-02  7.00
2013-10-03  8.00
2013-10-04  9.00
2013-10-07  10.00
2013-10-08  10.00
2013-10-09  10.50
$

will produce a back-adjusted price time series that pretends the dividend payouts all happened at some time before the series begins.

As can be seen, at no point in time the prices are actually falling and the daily price differences now accurately reflect what actually happened to the ticker XYZ.

Back-adjustment leaves prices in the present unchanged while prices in the past undergo the adjustment process. This is helpful because present prices can just be appended to the back-adjusted series provided no corporate action has taken place. A new adjustment run is only necessary when a new corporate action event has been observed.

However, back-adjustment will interfere with records about position openings as now the opening price does not correspond to the adjusted price. In such cases it can be helpful to forward-adjust a time series as demonstrated by:

$ cattle apply --forward XYZ.tser XYZ.echs
2013-10-01  10.00
2013-10-02  11.00
2013-10-03  12.00
2013-10-04  13.00
2013-10-07  14.00
2013-10-08  14.00
2013-10-09  14.50
$

This time series pretends the dividend payouts will happen at some point in the future and that the ticker XYZ is still quoted cum dividend.

Had you opened a position on 01 Oct, and closed it on 08 Oct, you would have made GBP 4.00, the real market price has gone from GBP 10.00 to GBP 10.00 but there has been 2 dividend payments a GBP 2.00, so totalling GBP 4.00.

Forward-adjustment leaves prices in the past (before the first corporate action event) untouched but changes all prices afterwards. That means a new price can only be added to the series in adjusted form, i.e. regardless whether or not a corporate action event has been observed the adjustment tool must be run every day.

Reversing the adjustment

Sometimes it is desirable to reproduce the original (raw) time series from an adjusted series and a series of corporate action events.

The cattle tool provides the --reverse switch for this. For the first example (stored in a file XYZ.adj) the command line:

$ cattle apply --reverse XYZ.adj XYZ.echs
2013-10-01  10.00
2013-10-02  11.00
2013-10-03  12.00
2013-10-04  11.00
2013-10-07  10.00
2013-10-08  10.00
2013-10-09  10.50
$

will reproduce exactly the original time series (XYZ.tser) that we used to produce the adjusted series.

Similarly for the forward-adjusted time series (stored in XYZ.fadj):

$ cattle apply --reverse --forward XYZ.fadj XYZ.echs
2013-10-01  10.00
2013-10-02  11.00
2013-10-03  12.00
2013-10-04  11.00
2013-10-07  10.00
2013-10-08  10.00
2013-10-09  10.50
$

reproduces the original time series, too. The switch --forward in the second example is necessary as information is lost about whether an adjustment has been applied forwards or backwards.

Total returns

So far we considered corporate actions (especially those with payment events) as if they could be moved in time so long as prices are adjusted accordingly. However, this inaccurately reflects situations where it's not a concrete investment that needs to be tracked but rather a benchmark or something abstract (like what would have happened to an initial EUR 100 investment).

Under the assumption that we can always opt out of payouts (like dividends, interest payments, etc.) cattle offers an adjustment mode that keeps true returns unchanged. Given above time series and corporate action event file (XYZ.tser, XYZ.echs) the command line:

$ cattle apply --total-return XYZ.tser XYZ.echs
2013-10-01  6.82
2013-10-02  7.50
2013-10-03  8.18
2013-10-04  9.00
2013-10-07  10.00
2013-10-08  10.00
2013-10-09  10.50
$

As in the total payout case, future values could simply be appended to the series when no corporate action had taken place in the covered period. Unlike before, dividends account partially for past prices from the moment the dividend has gone ex, i.e. the adjusted series does not pretend the dividends have been paid out at some point in the past or future but have been part of the observed prices all along.

Naturally and for the same reasons as given above, total return adjustments can also be made in forward direction (-F is short for --forward):

$ cattle apply --total-return -F XYZ.tser XYZ.echs
2013-10-01  10.00
2013-10-02  11.00
2013-10-03  12.00
2013-10-04  13.20
2013-10-07  14.67
2013-10-08  14.67
2013-10-09  15.40
$

With total return adjustments it's very easy to answer questions like: How much did my investment earn in percent since opening the position?

Moreover, total return adjustments can be reversed just like total payout adjustments (using the --reverse switch). However, because adjusted prices are always quantised to market prices, the reversal might suffer from quantisation artefacts.

Supported corporate action events

We generally only support price relevant corporate action events from the SMPG Corporate Actions Events Templates - SR2012:

  • BONU issuing of bonus shares
  • DRIP dividend reinvestment plans
  • DVCA cash dividends
  • DVSE stock dividends
  • RHTS rights issue
  • SPLF forward split
  • SPLR reverse split

To aid unconventional action events cattle also supports its own caev code CTL1 that allows to explicitly express any linear relationships of a corporate action event transition with respect to the market price, the nominal value and the number of outstanding shares. To convert ordinary corporate action events into this explicit format, use cattle print -r|--raw.

Similar projects

None.

Further reading