Abstract
Some unified tests have been proposed recently in the literature for testing predictability of asset returns based on a simple linear predictive regression model, which has a drawback that predicted variable cannot be stationary if the predicting variable is nonstationary. To solve this issue, this paper includes the difference of the predicting variable into the simple linear predictive regression. Furthermore, a unified empirical likelihood inference is developed to test the predictability regardless of the properties of the predicting variable. A simulation study is conducted to confirm the efficiency of the proposed methods before applying to a real example.
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