For the same model as above, and given the following results, do a forward and backward predictive failure test:

1981M1–1995M12 rt = 0.0215 + 1.491 rmt RSS = 0.189 T = 180 (4.83)

1981M1–1994M12 rt = 0.0212 + 1.478 rmt RSS = 0.148 T = 168 Classical linear regression model assumptions and diagnostic tests 205 1982M1–1995M12 rt = 0.0217 + 1.523 rmt RSS = 0.182 T = 168 (4.85)
What is your conclusion?

AppendixLO1