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Time-varying coefficient estimation in SURE models. Application to portfolio management

Isabel Casas (), Eva Ferreira () and Susan Orbe ()
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Isabel Casas: Basque Center for Applied Mathematics; and The University of Southern Denmark, Postal: Basque Center for Applied Mathematics, Avenida Mazarredo 14, 48009, Bilbao, Spain; and The University of Southern Denmark, Campusvej 55, 5230 Odense, Denmark
Eva Ferreira: University of the Basque Country, Postal: Departamento de Economia Aplicada III & BETS. University of the Basque Country, Avenida Lehendakari Aguirre 83, 48015 Bilbao, Spain
Susan Orbe: University of the Basque Country, Postal: Departamento de Economia Aplicada III & BETS. University of the Basque Country, Avenida Lehendakari Aguirre 83, 48015 Bilbao, Spain

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

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 very general conditions. Theoretical results together with a simulation study differentiates the cases for which the estimation of a tv-SURE outperforms the estimation of a Single Regression Equations model with time-varying coefficients (tv-SRE). 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: Time-varying; Nonparametric; SURE; Five factor model; Asset pricing (search for similar items in EconPapers)
JEL-codes: C01 C14 (search for similar items in EconPapers)
Date: 0310
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