Here's how Yahoo Finance apparently calculates Adjusted Close stock prices:

https://help.yahoo.com/kb/adjusted-close-sln28256.html

From this, I understand that a constant factor is applied to the unadjusted price and that said factor changes with each dividend or split event, which should happen not too often. And that I should be able to infer that factor by dividing the unadjusted by the adjusted price.

However, if I verify this with AAPL data (using Python), I get confusing results:

import yfinance 
df =  yfinance.download("AAPL", start="2010-01-01", end="2019-12-31")
df["Factor"] = df["Close"] / df["Adj Close"]
print(df["Factor"].nunique(), df["Factor"].count())

Which produces: 2442 2516

So the factor is different in by far most of the cases. But AAPL usually has 4 dividend events per year and had a stock split during that period, so I would expect roughly 40 different factors rather than 2442.

Is the formula Yahoo Finance provides under the link above overly simplified or am I missing something here?

The problem is that Yahoo Finance doesn't provide BOTH raw and adjusted prices for you to work with. If you check the footnote of a sample historical price page (e.g., MSFT), you will see a text that says "Close price adjusted for splits; Adjusted close price adjusted for both dividends and splits."

In order to derive clean adjusted ratios, both raw (unadjusted) and adjusted prices are needed. Then you can apply an adjustment method such as CRSP to derive the correct values. In summary, you didn't do anything wrong! It's the intrinsic limitation of Yahoo's output.

References: [1] https://medium.com/@patrick.collins_58673/stock-api-landscape-5c6e054ee631 [2] http://www.crsp.org/products/documentation/crsp-calculations