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Estimation of hedonic price functions via additive nonparametric regression

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  • Carlos Martins-Filho
  • Okmyung Bin

Abstract

We model a hedonic price function for housing as an additive nonparametric regression. Estimation is done via a backfitting procedure in combination with a local polynomial estimator. It avoids the pitfalls of an unrestricted nonparametric estimator, such as slow convergence rates and the curse of dimensionality. Bandwidths are chosen using a novel plug in method that minimizes the asymptotic mean average squared error (AMASE) of the regression. We compare our results to alternative parametric models and find evidence of the superiority of our nonparametric model. From an empirical perspective our study is interesting in that the effects on housing prices of a series of environmental characteristics are modeled in the regression. We find these characteristics to be important in the determination of housing prices. Copyright Springer-Verlag 2005

Suggested Citation

  • Carlos Martins-Filho & Okmyung Bin, 2005. "Estimation of hedonic price functions via additive nonparametric regression," Empirical Economics, Springer, vol. 30(1), pages 93-114, January.
    • Handle: RePEc:spr:empeco:v:30:y:2005:i:1:p:93-114
    DOI: 10.1007/s00181-004-0224-6
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    Cited by:

    1. Alexander März & Nadja Klein & Thomas Kneib & Oliver Musshoff, 2016. "Analysing farmland rental rates using Bayesian geoadditive quantile regression," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 43(4), pages 663-698.
    2. Alan T. K. Wan & Shangyu Xie & Yong Zhou, 2017. "A varying coefficient approach to estimating hedonic housing price functions and their quantiles," Journal of Applied Statistics, Taylor & Francis Journals, vol. 44(11), pages 1979-1999, August.
    3. W. Brunauer & S. Lang & P. Wechselberger & S. Bienert, 2010. "Additive Hedonic Regression Models with Spatial Scaling Factors: An Application for Rents in Vienna," The Journal of Real Estate Finance and Economics, Springer, vol. 41(4), pages 390-411, November.
    4. Carlos Felipe Balcázar & Lidia Ceriani & Sergio Olivieri & Marco Ranzani, 2017. "Rent‐Imputation for Welfare Measurement: A Review of Methodologies and Empirical Findings," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63(4), pages 881-898, December.
    5. repec:asg:wpaper:1006 is not listed on IDEAS
    6. Alan T. K. Wan & Jinhong You & Riquan Zhang, 2016. "A Seemingly Unrelated Nonparametric Additive Model with Autoregressive Errors," Econometric Reviews, Taylor & Francis Journals, vol. 35(5), pages 894-928, May.
    7. Wolfgang Brunauer & Stefan Lang & Nikolaus Umlauf, 2010. "Modeling House Prices using Multilevel Structured Additive Regression," Working Papers 2010-19, Faculty of Economics and Statistics, Universität Innsbruck.
    8. Lee Chun Chang & Hui-Yu Lin, 2012. "The Impact of Neighborhood Characteristics on Housing Prices-An Application of Hierarchical Linear Modeling," International Journal of Management and Sustainability, Conscientia Beam, vol. 1(2), pages 31-44.
    9. Manuel Landajo & Celia Bilbao & Amelia Bilbao, 2012. "Nonparametric neural network modeling of hedonic prices in the housing market," Empirical Economics, Springer, vol. 42(3), pages 987-1009, June.
    10. Wolfgang Brunauer & Stefan Lang & Peter Wechselberger & Sven Bienert, 2008. "Additive Hedonic Regression Models with Spatial Scaling Factors: An Application for Rents in Vienna," Working Papers 2008-17, Faculty of Economics and Statistics, Universität Innsbruck.
    11. Renigier-Biłozor Małgorzata & Wiśniewski Radosław, 2012. "The Impact of Macroeconomic Factors on Residential Property Price Indices in Europe," Folia Oeconomica Stetinensia, Sciendo, vol. 12(2), pages 103-125, December.
    12. Elena B. Pokryshevskaya & Evgeny A. Antipov, 2011. "Applying a CART-based approach for the diagnostics of mass appraisal models," Economics Bulletin, AccessEcon, vol. 31(3), pages 2521-2528.
    13. Füss, Roland & Koller, Jan A., 2016. "The role of spatial and temporal structure for residential rent predictions," International Journal of Forecasting, Elsevier, vol. 32(4), pages 1352-1368.
    14. Bontemps, Christophe & Simioni, Michel & Surry, Yves R., 2005. "Hedonic Housing Prices and Agricultural Pollution: An Empirical Investigation on Semiparametric Models," 2005 Annual meeting, July 24-27, Providence, RI 19547, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    15. Löchl, Michael & Axhausen, Kay W., 2010. "Modelling hedonic residential rents for land use and transport simulation while considering spatial effects," The Journal of Transport and Land Use, Center for Transportation Studies, University of Minnesota, vol. 3(2), pages 39-63.
    16. Yu, Peiyong, 2015. "The Effect of Eminent Domain on Private and Mixed Development on Property Values," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 45(2).
    17. Kagie, M. & van Wezel, M.C., 2006. "Hedonic price models and indices based on boosting applied to the Dutch housing market," Econometric Institute Research Papers EI 2006-17, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    18. Sun, Tianyu & Chand, Satish & Sharpe, Keiran, 2018. "Effect of aging on housing prices: evidence from a panel data," MPRA Paper 94418, University Library of Munich, Germany, revised 01 Mar 2019.
    19. Yiyang GU, 2018. "What are the most important factors that influence the changes in London Real Estate Prices? How to quantify them?," Journal of Economics Bibliography, KSP Journals, vol. 5(1), pages 18-24, March.
    20. Yiyang Gu, 2018. "What are the most important factors that influence the changes in London Real Estate Prices? How to quantify them?," Papers 1802.08238, arXiv.org.
    21. Antipov, Evgeny & Pokryshevskaya, Elena, 2010. "Mass appraisal of residential apartments: An application of Random forest for valuation and a CART-based approach for model diagnostics," MPRA Paper 27645, University Library of Munich, Germany.
    22. Celia Bilbao & Amelia Bilbao & José Labeaga, 2010. "The welfare loss associated to characteristics of the goods: application to housing policy," Empirical Economics, Springer, vol. 38(2), pages 305-323, April.
    23. da Silva, Fernando A. Boeira Sabino, 2002. "Additive nonparametric regression estimation via backfitting and marginal integration: Small sample performance," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 22(2), November.
    24. Martijn Kagie & Michiel Van Wezel, 2007. "Hedonic price models and indices based on boosting applied to the Dutch housing market," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 15(3‐4), pages 85-106, July.
    25. Robert J. Hill & Daniel Melser, 2007. "Comparing House Prices Across Regions and Time: An Hedonic Approach," Discussion Papers 2007-33, School of Economics, The University of New South Wales.

    More about this item

    Keywords

    Additive nonparametric regression; local polynomial estimation; hedonic price models; housing markets; C14; R21;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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