Wonky algorithm / benchmark returns

Why does buying and holding SPY perform so much differently than the benchmark? I noticed that when I try to invest the entire $1M in my sample portfolio that it invests$1.005M, which may be a portion of the problem, but certainly does not fully explain it. (Speaking of, how would I invest the portfolio amount?)

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Total Returns
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Alpha
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Beta
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Sharpe
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Sortino
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Max Drawdown
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Benchmark Returns
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Volatility
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 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
import math

# Put any initialization logic here.  The context object will be passed to
# the other methods in your algorithm.
def initialize(context):
context.invested = False
pass

# Will be called on every trade event for the securities you specify.
def handle_data(context, data):
# Implement your algorithm logic here.

# data[sid(X)] holds the trade event data for that security.
# data.portfolio holds the current portfolio state.

# Place orders with the order(SID, amount) method.

# TODO: implement your own logic here.
spy = sid(8554)
if not context.invested:
shares = math.floor(context.portfolio.cash/data[spy].price)
order(spy, shares)
context.invested = True

This backtest was created using an older version of the backtester. Please re-run this backtest to see results using the latest backtester. Learn more about the recent changes.
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6 responses

I believe I read a different thread that explains this. The benchmark does not include dividends but is price only, while the algo includes dividends.

If that's the case it would certainly explain it.

Hi Ben,

Rex nailed it - the difference is that the benchmark does not reinvest the dividends. For more info, see this thread he was referring to: https://www.quantopian.com/posts/question-regarding-the-benchmark

If you have suggestions, we'd love to hear them!

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Thank you for confirming, Alisa. I see that Dan also believes there should be a total return benchmark used by default. I really hope that can be prioritized since it seems like an easy fix and it has a big impact to a really core part of the platform.

I completely agree and if it was an easy fix as you mentioned, I'd love to see the change. We're aware of the discrepancy and unfortunately its not an easy fix, otherwise we would have gladly made the adjustment!

Hmm, okay, well I appreciated that you're aware and looking at it. I figured you'd just pop in a different data series and be good to go.