Thechnical Trading Rules in the Madrid Stock Market using Artificial Neural Networks

Abstract

In this paper we investígate the profitability of 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. In contrast, we find that the buy-and-hold strategy generates higher returns than the trading rule based on ANN for a "bull" market subperiod.