Time-Varying Coefficient Estimation in SURE Models. Application to Portfolio Management*

Isabel Casas, Eva Ferreira and Susan Orbe

Journal of Financial Econometrics, 2021, vol. 19, issue 4, 707-745

Abstract: This paper provides a detailed analysis of the asymptotic properties of a kernel estimator for a seemingly unrelated regression equations model with time-varying coefficients (tv-SURE) under general conditions. Theoretical results together with a simulation study differentiate the cases for which the estimation of a tv-SURE outperforms the estimation of a single regression equations model with time-varying coefficients. The study shows that Zellner’s results cannot be straightforwardly extended to the time-varying case. The tv-SURE is applied to the Fama and French five-factor model using data from four different international markets. Finally, we provide the estimation under cross-restriction and discuss a testing procedure.

Keywords: asset pricing; five-factor model; nonparametric; SURE; time-varying (search for similar items in EconPapers)
JEL-codes: C01 C14 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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Working Paper: Time-varying coefficient estimation in SURE models. Application to portfolio management (2017)
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