Department of Economics and Business Economics

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

Publication: ResearchWorking paper

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  • rp17_33

    Final published version, 914 KB, PDF-document

  • Isabel Casas
    Isabel CasasBasque Center for Applied Mathematics; and The University of Southern DenmarkSpain
  • Eva Ferreira
    Eva FerreiraUniversity of the Basque Country Spain
  • Susan Orbe
    Susan OrbeUniversity of the Basque Country Spain
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.
Original languageEnglish
Place of PublicationAarhus
PublisherInstitut for Økonomi, Aarhus Universitet
Number of pages36
StatePublished - 9 Oct 2017
SeriesCREATES Research Papers
Number2017-33

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