On the profitability of technical trading rules based on artificial neuralnetworks: Evidence from the Madrid stock market

In this paper we investigate the profitability of a simple technical tradin g rule based on Artificial Neural Networks (ANNs). Our results, based on ap plying this investment strategy to the General Index of the Madrid Stock Ma rket, 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 s trategy generates higher returns than the trading rule based on ANN only fo r a "bull" market subperiod. (C) 2000 Elsevier Science S.A. All rights rese rved.