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Optimisation of Technical Rules by Genetic Algorithms: Evidence from the Madrid Stock Market

  • Fernando Fernández-Rodríguez
  • Christian González-Martel
  • Simón Sosvilla-Rivero

This paper investigates the profitability of a simple and very common technical trading rule applied to the General Index of the Madrid Stock Market. The optimal trading rule parameter values are found using a genetic algorithm. The results suggest that, for reasonable trading costs, the technical trading rule is always superior to a risk-adjusted buy-and-hold strategy.

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File URL: http://documentos.fedea.net/pubs/dt/2001/dt-2001-14.pdf
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Paper provided by FEDEA in its series Working Papers with number 2001-14.

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Handle: RePEc:fda:fdaddt:2001-14
Contact details of provider: Web page: http://www.fedea.net

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  1. Fernando Fernández-Rodríguez & Simón Sosvilla-Rivero & Julián Andrada-Félix, . "Technical analysis in the Madrid stock exchange," Working Papers 99-05, FEDEA.
  2. Bessembinder, Hendrik & Chan, Kalok, 1995. "The profitability of technical trading rules in the Asian stock markets," Pacific-Basin Finance Journal, Elsevier, vol. 3(2-3), pages 257-284, July.
  3. Brock, W. & Lakonishok, J. & Lebaron, B., 1991. "Simple Technical Trading Rules And The Stochastic Properties Of Stock Returns," Working papers 90-22, Wisconsin Madison - Social Systems.
  4. Allen, Franklin & Karjalainen, Risto, 1999. "Using genetic algorithms to find technical trading rules," Journal of Financial Economics, Elsevier, vol. 51(2), pages 245-271, February.
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