Abstract

This study constructs predictive regressions in which the predictable variable exhibits a level shift at some unknown date. We establish novel procedures to test asset return predictability via empirical likelihood (EL) methods based on weighted score equations. Monte Carlo simulations confirm that the EL-based tests perform well in terms of size and power in finite samples.

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call

Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.