Bessembinder and Chan (1995) test whether the trading rule set of Brock et al. (1992) has forecasting power when applied to the stock market indices of Japan, Hong Kong, South Korea, Malaysia, Thailand and Taiwan in the period January 1975 through December 1989. Break-even transaction costs that eliminate the excess return of a double or out strategy over a buy-and-hold are computed. The rules are most successful in the markets of Malaysia, Thailand and Taiwan, where the buy-sell difference is on average 51.9% yearly. Break-even round-trip transaction costs are estimated to be 1.57% on average (1.34% in the case if a one-day lag in trading is incorporated). It is concluded that excess profits over the buy-and-hold could be made, but emphasis is placed on the fact that the relative riskiness of the technical trading strategies is not controlled for.
For the UK stock market Hudson, Dempsey and Keasey (1996) test the trading rule set of Brock et al. (1992) on daily data of the Financial Times Industrial Ordinary index, which consists of 30 UK companies, in the period July 1935 to January 1994. They want to examine whether the same set of trading rules outperforms the buy-and-hold on a different market. It is computed that the trading rules on average generate an excess return of 0.8% per transaction over the buy-and-hold, but that the costs of implementing the strategy are at least 1% per transaction. Further when looking at the subperiod 1981-1994, the trading rules seem to lose their forecasting power. Hence Hudson et al. (1996) conclude that although the technical trading rules examined do have predictive ability, their use would not allow investors to make excess returns in the presence of costly trading. Additionally Mills (1997) simultaneously finds in the case of zero transaction costs with the bootstrap technique introduced by Brock et al. (1992) that the good results for the period 1935-1980 cannot be explained by an AR-ARCH model for the daily returns. Again, for the period after 1980 it is found that the trading rules do not generate statistically significant results. Mills (1997) concludes that the trading rules mainly worked when the market was driftless but performed badly in the period after 1980, because the buy-and-hold strategy was clearly dominating.
Kho (1996) tests a limited number of double crossover moving-average trading rules on weekly data of BP, DEM, JPY, SF futures contracts traded on the International Monetary Market (IMM) division of the Chicago Mercantile Exchange from January 1980 through December 1991. The results show that there have been profit opportunities that could have been exploited by moving-average trading rules. The measured profits are so high that they cannot be explained by transaction costs, serial correlation in the returns or a simple volatility expected return relation (GARCH-in-mean model). Next, Kho (1996) estimates a conditional CAPM model that captures the time-varying price of risk. It is concluded that the technical trading rule profits found can be well explained by time-