Is the Swedish stock market efficient? Evidence from some simple trading rules ☆ Massoud Metghalchi a, ⁎ , Yung-Ho Chang b , Juri Marcucci c a University of Houston—Victoria, School of Business Administration, 14000 University Boulevard Sugar Land, TX 77479 USA b Tunghai University, Department of Finance, 181 Section 3, Taichung-Kan Road, Taichung, Taiwan c Bank of Italy, Research Department, Via Nazionale 91, I-00184 Rome, Italy Received 8 May 2007; accepted 8 May 2007 Available online 18 May 2007 Abstract In this paper we examine the profitability of some technical trading rules in the Swedish stock market over the 1986–2004 periods. The results indicate that moving average rules do indeed have predictive power and could discern recurring-price patterns for profitable trading, even after accounting for the effects of data snooping biases. To assess the profitability of different technical trading rules and strategies, we adopt White's [White, H. (2000). A Reality Check for data snooping, Econometrica, 68, 1097–1126.] Reality Check test that quantifies the data snooping bias adjusting for its effects. Our results also support the hypothesis that technical trading rules can outperform the buy-and-hold strategy even considering transaction costs. © 2007 Elsevier Inc. All rights reserved. JEL classification: G14; C22; C52 Keywords: Technical analysis; Trading rules; Market efficiency; Reality Check; Swedish stock market 1. Introduction Advocates of market efficiency believe that any attempts by technical analysts to predict recurring-price patterns are useless and a technician cannot beat the buy-and-hold strategy in the Available online at www.sciencedirect.com International Review of Financial Analysis 17 (2008) 475 – 490 ☆ We wish to thank the editor Lance A. Nail and an anonymous referee for their valuable comments and suggestions on earlier versions of this paper. All remaining errors are our own. ⁎ Corresponding author. Tel.: +1 281 275 3381; fax: +1 713 7854717. E-mail addresses: metghalchim@uhv.edu (M. Metghalchi), changy@mail.thu.edu.tw (Y.-H. Chang), juri.marcucci@bancaditalia.it (J. Marcucci). 1057-5219/$ - see front matter © 2007 Elsevier Inc. All rights reserved. doi:10.1016/j.irfa.2007.05.001