On the profitability of technical trading rules based on arifitial neural networks : evidence from the Madrid stock market
AbstractIn this paper we investigate the profitability of a simple technical trading rule based on Artificial Neural Networks (ANNs). Our results, based on applying this investment strategy to the General Index of the Madrid Stock Market, suggest that, in absence of trading costs, the technical trading rule is always superior to a buy-and-hold strategy for both "bear" market and "stable" market episodes. On the other hand, we find that the buy-and-hold strategy generates higher returns than the trading rule based on ANN only for a "bull" market subperiod.
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Technical trading rules; Neural network models; Security markets;
Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
This paper has been announced in the following NEP Reports:
- NEP-ALL-1999-12-14 (All new papers)
- NEP-ETS-1999-12-14 (Econometric Time Series)
- NEP-FIN-1999-12-14 (Finance)
- NEP-IND-1999-12-14 (Industrial Organization)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Pesaran, M.H. & Timmermann, A., 1990.
"A Simple Non-Parametric Test Of Predictive Performance,"
Papers, California Los Angeles - Applied Econometrics
29, California Los Angeles - Applied Econometrics.
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- Pesaran, M.H. & Timmermann, A., 1990. "A Simple, Non-Parametric Test Of Predictive Performance," Cambridge Working Papers in Economics 9021, Faculty of Economics, University of Cambridge.
- Fernando Fernandez-Rodriguez & Simon Sosvilla-Rivero & Maria Dolores Garcia-Artiles, 1997. "Using nearest neighbour predictors to forecast the Spanish stock market," Investigaciones Economicas, FundaciÃ³n SEPI, FundaciÃ³n SEPI, vol. 21(1), pages 75-91, January.
- Fama, Eugene F, 1991. " Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-617, December.
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