Multiscale SUR Estimation of Systematic Risk

Michis Antonis A. ()
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Michis Antonis A.: 87194 Central Bank of Cyprus , 8 Kennedy Avenue, Nicosia 1076, Cyprus

Studies in Nonlinear Dynamics & Econometrics, 2025, vol. 29, issue 2, 129-145

Abstract: We propose a multiscale version of the seemingly unrelated regressions model, based on wavelet transform-based time series observations. Each regression equation refers to a different time scale, which enables the use of across-scale error covariances in the feasible GLS estimation procedure for efficiency gains. We demonstrate the advantages of the proposed method over OLS with two studies: an empirical study using stock market returns for the main US industrial sectors and a detailed Monte Carlo simulation study with alternative wavelet filters. We also provide explanations for the suitability of the proposed method for estimating long-term systematic risk.

Keywords: seemingly unrelated regressions; wavelets; error covariance; systematic risk (search for similar items in EconPapers)
JEL-codes: C14 C30 G12 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1515/snde-2023-0017

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