Back to Community
Buying and holding SPY returns different results from Benchmark SPY

Hello,

I was wondering if someone could explain the discrepancy in results between buying and holding SPY as a strategy and the returns shown when SPY is the benchmark. Have a look at the backtest attached. The strategy returns 78% while the benchmark returns 93%, why the difference?

Regards,
Mark

Clone Algorithm
12
Loading...
Backtest from to with initial capital
Total Returns
--
Alpha
--
Beta
--
Sharpe
--
Sortino
--
Max Drawdown
--
Benchmark Returns
--
Volatility
--
Returns 1 Month 3 Month 6 Month 12 Month
Alpha 1 Month 3 Month 6 Month 12 Month
Beta 1 Month 3 Month 6 Month 12 Month
Sharpe 1 Month 3 Month 6 Month 12 Month
Sortino 1 Month 3 Month 6 Month 12 Month
Volatility 1 Month 3 Month 6 Month 12 Month
Max Drawdown 1 Month 3 Month 6 Month 12 Month
# Put any initialization logic here.  The context object will be passed to
# the other methods in your algorithm.
def initialize(context):
    set_commission(commission.PerTrade(cost=0.00))  
    set_slippage(slippage.FixedSlippage(spread=0.00))
    context.first = True
    

# Will be called on every trade event for the securities you specify. 
def handle_data(context, data):
    
    if context.first :
        order_target_percent(symbol('SPY'), 1.0)
        context.first = False
There was a runtime error.
6 responses

Benchmarks reinvest dividends.

Thanks Simon,

So conversely I assume a strategy that holds dividend paying stocks (like a value strategy that rebalances annually) will not have dividend payments properly accounted for in the backtest. Is that correct?

Backtests are correct; if you want to reinvest dividends the algo has to reinvest them. If not, the cash will just accumulate through the year.

Arg why can I not edit posts on the phone.

Noted, passed along the request internally. EDIT: To clarify, the request for editing a forum post on mobile!

Disclaimer

The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.

Thanks Simon,

That makes sense.