Description of a straightforward strategy to invest: An experiment in the Spanish stock market

Abstract

In this paper we reintroduce the topic of arbitrage, explaining an easy method to obtain reasonable results for every possible behavior in the stock market. It is based on purchases at low prices and sales at higher prices, and it is closely related to volatility. Obviously, our technique has its limitations, but we study the hypotheses needed to assure a good performance. Our aim is to contribute to the better understanding of the topic by the researchers, giving an idea of the way how algorithmic strategies work in practice. Finally, we exemplify and test the method through the use of a real data set from some shares of Madrid Stock Exchange, for the time period 1994-2011, and express some concluding remarks. © 2012 Springer-Verlag Berlin Heidelberg.