A Complete Analysis Of The Basic Concepts Of Stock Restoration And The Calculation And Application Of Pre-restoration

01Basic concept of restoration of rights

Overview of ex-rights, ex-dividends and restoration of rights

Before discussing the restoration of rights, we have to mention the concept of ex-rights and ex-dividends in dividends. Ex-rights and ex-dividends are a way for listed companies to pay dividends, but this method will lead to a corresponding decrease in stock prices. Since there will be an obvious gap in the stock price after ex-rights and dividends, in order to correct this price gap, the concept of restoration of rights came into being.

The importance of restoration

Restoration, simply put, is to adjust the stock price to eliminate the impact of ex-rights and dividends, so that the stock price can more truly reflect the actual value of the company. This adjustment process not only corrects the price gap, but also provides investors with a more accurate reference to the stock price, helping them make more informed investment decisions.

02The difference between pre-restoration and post-restoration

Restoration is the process of restoring rights and interest to the stock price and trading volume. With this fix, we can draw a more accurate chart of stock price movements based on the actual rise and fall of the stock, and ensure that trading volume is compared on the same equity scale. Restoration is mainly divided into two methods: pre-restoration and post-restoration:

Calculation and application of former restoration rights

Before restoration, the calculation formula is: price after restoration = (price before restoration – cash dividend) ÷ (1 + share change ratio). In this way, changes in the stock price before and after ex-rights will be taken into account, allowing investors to have a more comprehensive understanding of the historical trend of the stock price.

Provide a more comprehensive historical trend analysis to facilitate technical analysis. In technical analysis, the former restoration of rights provides a clearer perspective, because the latest actual stock price is used, and the trend of the K-line and the moving average maintains continuity, which will not interfere with the market observation.

Calculation and application of post-restoration rights

After restoration of rights, the calculation formula is: price after restoration of rights = price before restoration of rights × (1 + share change ratio) + cash dividend. This method focuses on correcting the post-ex-dividend stock price to ensure continuity with the pre-ex-dividend stock price, thereby providing investors with a smoother stock price reference.

Give an example to illustrate how reinstatement is calculated. Post-rights restoration takes into account the stock price correction after ex-rights. The price after such processing may deviate from the actual transaction price, but it can more accurately reflect the growth in the true value of the stock and the actual rate of return obtained by investors.

03Summary and investment application

In the real stock market environment, stock price fluctuations are closely related to the company's stock bonuses, dividends, and overall operating conditions. Investors not only need to understand historical data, but also need to have a deep understanding of the importance of the concept of restoration. Although historical price data provides us with a reference, relying solely on these data without a deep understanding of the industry and company is not enough. Therefore, investors need to comprehensively use their "valuation" capabilities to judge whether a certain stock has investment value.