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

Author

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  • Isabel Casas
  • Eva Ferreira
  • Susan Orbe

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.

Suggested Citation

  • Isabel Casas & Eva Ferreira & Susan Orbe, 2021. "Time-Varying Coefficient Estimation in SURE Models. Application to Portfolio Management," Journal of Financial Econometrics, Oxford University Press, vol. 19(4), pages 707-745.
    • Handle: RePEc:oup:jfinec:v:19:y:2021:i:4:p:707-745.
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    File URL: http://hdl.handle.net/10.1093/jjfinec/nbz010
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    Cited by:

    1. Dean Fantazzini & Julia Pushchelenko & Alexey Mironenkov & Alexey Kurbatskii, 2021. "Forecasting Internal Migration in Russia Using Google Trends: Evidence from Moscow and Saint Petersburg," Forecasting, MDPI, vol. 3(4), pages 1-30, October.
    2. E. Ferreira & S. Orbe & J. Ascorbebeitia & B. 'Alvarez Pereira & E. Estrada, 2021. "Loss of structural balance in stock markets," Papers 2104.06254, arXiv.org.
    3. Casas Villalba, Maria Isabel & Mao, Xiuping & Lopes Moreira da Veiga, María Helena, 2020. "Adaptative predictability of stock market returns," DES - Working Papers. Statistics and Econometrics. WS 31648, Universidad Carlos III de Madrid. Departamento de Estadística.
    4. Peng, Yi-Ting & Chang, Tsangyao & Ranjbar, Omid, 2025. "Analyzing the dynamics of the persistence of energy-related uncertainty of G7 countries: What does the time-varying SUR-ADF model say?," Energy, Elsevier, vol. 320(C).
    5. Isabel Casas & Xiuping Mao & Helena Veiga, 2018. "Reexamining financial and economic predictability with new estimators of realized variance and variance risk premium," CREATES Research Papers 2018-10, Department of Economics and Business Economics, Aarhus University.
    6. Fu, Zhonghao & Hong, Yongmiao & Su, Liangjun & Wang, Xia, 2023. "Specification tests for time-varying coefficient models," Journal of Econometrics, Elsevier, vol. 235(2), pages 720-744.
    7. Wang, Ziwei & Yang, Haijun & Li, Zhen, 2025. "Will technological advancement affect Bitcoin trading and pricing? Evidence from BRC-20 tokens," Global Finance Journal, Elsevier, vol. 65(C).
    8. Armin Pourkhanali & Jonathan Keith & Xibin Zhang, 2021. "Conditional Heteroscedasticity Models with Time-Varying Parameters: Estimation and Asymptotics," Monash Econometrics and Business Statistics Working Papers 15/21, Monash University, Department of Econometrics and Business Statistics.
    9. Loïc Maréchal, 2021. "Do economic variables forecast commodity futures volatility?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(11), pages 1735-1774, November.

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    Keywords

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    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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