0.50% costs per trade case. Remarkably, only for the Egyptian CMA the SPA-test does reject its null hypothesis, even in the 1% costs per trade case. Hence we conclude that for all but one of the market indices the best strategy, selected by the mean return criterion, is not capable of beating the buy-and-hold benchmark strategy, after a correction is made for transaction costs and data snooping.

5.3.2  Results for the Sharpe ratio criterion

Technical trading rule performance

Similar to tables 5.3 and 5.4, table 5.5 shows for trading case 3 some statistics of the best strategy selected by the Sharpe ratio criterion, if 0 or 0.25% costs per trade are implemented. Only the results for those indices are shown for which the best strategy selected by the Sharpe ratio criterion differs from the best strategy selected by the mean return criterion. Further, to summarize, table 5.6B shows for each index the Sharpe ratio of the best strategy selected by the Sharpe ratio criterion, after implementing 0, 0.10, 0.25, 0.50, 0.75 and 1% costs per trade, in excess of the Sharpe ratio of the buy-and-hold benchmark. For each index and for each transaction costs case it is found that the excess Sharpe ratio is considerably positive. In the last row of table 5.6B it can be seen that on average the excess Sharpe ratio declines from 0.0672 to 0.0320 if transaction costs increase from 0 to 1% per trade. Table 5.5 shows that the best strategies selected in the case of zero transaction costs are mainly strategies which trade frequently. For most indices, except 10, the best-selected strategy is the same as in the case that the best strategy is selected by the mean return criterion. If costs are increased to 0.25%, then the best strategies selected are those which trade less frequently. Now for 22 indices the best-selected strategy differs from the case when the best strategy is selected by the mean return criterion. The results for the two other trading cases are similar.

As for the mean return criterion it is found that for each stock market index the best technical trading strategy, selected by the Sharpe ratio criterion, beats the buy-and-hold benchmark and that this strategy can profitably be exploited, even after correction for transaction costs.

CAPM

The estimation results of the Sharpe-Lintner CAPM shown in tables 5.7B and 5.11 for the Sharpe ratio selection criterion are similar to the estimation results shown in tables 5.7A and 5.9 for the mean return selection criterion. If zero transaction costs are implemented, then it is found for trading case 3 that for all 51 indices the estimate of α is significantly
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