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Robust Hedonic Price Indexes

Author

Listed:
  • Steven C. Bourassa

    (Florida Atlantic University)

  • Eva Cantoni

    (University of Geneva)

  • Martin Hoesli

    (University of Geneva - Geneva School of Economics and Management (GSEM); Swiss Finance Institute; University of Geneva - Research Center for Statistics; University of Aberdeen - Business School)

Abstract

Purpose ‒ The aim of this paper is to demonstrate the application of robust techniques to the estimation of hedonic house price indexes. Design/methodology/approach ‒ We use simulation analysis to compare an index estimated using ordinary least squares (OLS) with several indexes estimated using robust techniques. The analysis employs sales transactions data from a US city. We then explore how robust methods can correct for omitted variables under some circumstances and how they affect the revision problem that occurs when longitudinal hedonic indexes are updated. Findings ‒ Robust methods can resolved missing variable problems in some circumstances and also can substantially reduce the revision problem in longitudinal hedonic indexes. Practical implications ‒ Robust techniques may be preferable to OLS when constructing longitudinal hedonic indexes. Originality/value ‒ This is the first paper to undertake a systematic analysis of the applicability of robust techniques in constructing hedonic house price indexes.

Suggested Citation

  • Steven C. Bourassa & Eva Cantoni & Martin Hoesli, 2013. "Robust Hedonic Price Indexes," Swiss Finance Institute Research Paper Series 13-49, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp1349
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    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2341074
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    Cited by:

    1. Elżbieta Jasińska & Edward Preweda, 2021. "Statistical Modelling of the Market Value of Dwellings, on the Example of the City of Kraków," Sustainability, MDPI, vol. 13(16), pages 1-25, August.
    2. Hill, Robert J. & Trojanek, Radoslaw, 2022. "An evaluation of competing methods for constructing house price indexes: The case of Warsaw," Land Use Policy, Elsevier, vol. 120(C).
    3. Bourassa, Steven C. & Hoesli, Martin, 2022. "Hedonic, residual, and matching methods for residential land valuation," Journal of Housing Economics, Elsevier, vol. 58(PA).

    More about this item

    Keywords

    House price indexes; Hedonic models; Robust methods; Distressed sales;
    All these keywords.

    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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