Market analysis and trading strategies with Bayesian networks

This paper examines the application of data fusion and probabilistic reasoning for investment decision and its performance evaluation. Specifically, Bayesian networks are used to model the qualitative and quantitative relationships between various factors that affect the dynamics of equity index (S&P 500) for predictive analysis. The resulting assessments are applied to trading decisions utilizing derivatives such as S&P futures and options. The simulated trading performance results demonstrate the effectiveness of the Bayesian network approach.