A Corrected Statex-Actuaries Daily Accumulation Index

The Statex-Actuaries Daily Accumulation Index is the only index for Australian equity markets which incorporates dividends, has daily observations, and has a long sample period. It is thus of considerable interest to researchers in finance who need to work with daily data. Unfortunately, a peculiarity in the design of the index means that it does not provide a true measure of daily total returns to equity. For example, on approximately 40% of days covered by the index, the accumulation return exceeds the corresponding price return. This is logically absurd, since dividends are not negative. The paper describes the index, identifies the problem in its construction, devises a method for overcoming this problem, and provides a computer program to implement this method.