IDEAS home Printed from https://ideas.repec.org/p/ebg/essewp/dr-03002.html
   My bibliography  Save this paper

Which Capital Growth Index for the Paris Residential Market?

Author

Listed:
  • Baroni, Michel

    (ESSEC Business School)

  • Barthelemy, Fabrice

    (THEMA)

  • Mokrane, Madhi

    (European Research, IPD France)

Abstract

In this paper we address the issue of measuring price performance for the Paris residential market. Our main focus is on choosing the appropiate index or indices capable of efficiently capturing capital growth, capital risk, and identifying the main risk factors inherent in this specific market.We identifying three existing indices but show that they may not be completely appropriate to address our main goals. We therefore construct two complementary repeat sales indices: a Case & Shiller (1987) Weighted Repeat sales (WRS) index and a Factorial index using the Baroni, Barthélémy & Mokhrane (2001) approach. We use the CD-BIEN database that contains more than 220 000 repeta sales transactions for residential properties in Paris area covering the period 1983-2001 period.We estimate these two indices for the Paris and close surrounding area and compare them to different existing indices: (I) the square metre index provides by the Chambre des Notaires de Paris and INSEE, (II) the IDP indices, (III) the listed real estate index. OUR conclusions yield interesting implications concerning real estate risk and suggest the construction of jointly using the repeat sales and the factorial approaches

Suggested Citation

  • Baroni, Michel & Barthelemy, Fabrice & Mokrane, Madhi, 2003. "Which Capital Growth Index for the Paris Residential Market?," ESSEC Working Papers DR 03002, ESSEC Research Center, ESSEC Business School.
    • Handle: RePEc:ebg:essewp:dr-03002
    as

    Download full text from publisher

    File URL: http://www.essec.fr/faculty/showDeclFileRes.do?declId=4636&key=__workpaper__
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Brown, Gerald R & Matysiak, George A, 2000. "Sticky Valuations, Aggregation Effects, and Property Indices," The Journal of Real Estate Finance and Economics, Springer, vol. 20(1), pages 49-66, January.
    2. Jim Clayton & David Geltner & Stanley W. Hamilton, 2001. "Smoothing in Commercial Property Valuations: Evidence from Individual Appraisals," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 29(3), pages 337-360, March.
    3. David Genesove & Christopher Mayer, 2001. "Loss Aversion and Seller Behavior: Evidence from the Housing Market," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(4), pages 1233-1260.
    4. David M. Geltner, 1993. "Estimating Market Values from Appraised Values without Assuming an Efficient Market," Journal of Real Estate Research, American Real Estate Society, vol. 8(3), pages 325-346.
    5. Karl E. Case & Robert J. Shiller, 1987. "Prices of single-family homes since 1970: new indexes for four cities," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 45-56.
    6. Neil Crosby & Anthony Lavers & Henry Foster, 1998. "Commercial property loan valuations in the UK: implications of current trends in valuation practice and legal liability," Journal of Property Research, Taylor & Francis Journals, vol. 15(3), pages 183-209, January.
    7. Joseph Gyourko & Donald B. Keim, "undated". "What Does the Stock Market Tell Us About Real Estate Returns? (Revised: 11-92)," Rodney L. White Center for Financial Research Working Papers 18-91, Wharton School Rodney L. White Center for Financial Research.
    8. Case, Karl E & Shiller, Robert J, 1989. "The Efficiency of the Market for Single-Family Homes," American Economic Review, American Economic Association, vol. 79(1), pages 125-137, March.
    9. Michel Baroni & Fabrice Barthélémy & Mahdi Mokrane, 2002. "A Repeat Sales Index for Paris," ERES eres2002_129, European Real Estate Society (ERES).
    10. Joseph Gyourko & Donald B. Keim, 1992. "What Does the Stock Market Tell Us About Real Estate Returns?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 20(3), pages 457-485, September.
    11. Englund, Peter & Quigley, John M. & Redfearn, Christian L., 1998. "Improved Price Indexes for Real Estate: Measuring the Course of Swedish Housing Prices," Journal of Urban Economics, Elsevier, vol. 44(2), pages 171-196, September.
    12. Case, Bradford & Quigley, John M, 1991. "The Dynamics of Real Estate Prices," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 50-58, February.
    13. Goetzmann, William Nelson, 1992. "The Accuracy of Real Estate Indices: Repeat Sale Estimators," The Journal of Real Estate Finance and Economics, Springer, vol. 5(1), pages 5-53, March.
    14. Mahdi Mokrane & Michel Baroni, 2001. "Physical Real Estate : Risk Factors and Investor Behaviour," ERES eres2001_236, European Real Estate Society (ERES).
    15. Gatzlaff, Dean H & Haurin, Donald R, 1997. "Sample Selection Bias and Repeat-Sales Index Estimates," The Journal of Real Estate Finance and Economics, Springer, vol. 14(1-2), pages 33-50, Jan.-Marc.
    16. Quan, Daniel C & Quigley, John M, 1991. "Price Formation and the Appraisal Function in Real Estate Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 4(2), pages 127-146, June.
    17. Meese, Richard A & Wallace, Nancy E, 1997. "The Construction of Residential Housing Price Indices: A Comparison of Repeat-Sales, Hedonic-Regression and Hybrid Approaches," The Journal of Real Estate Finance and Economics, Springer, vol. 14(1-2), pages 51-73, Jan.-Marc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michel Baroni & Fabrice Barthélémy & Mahdi Mokrane, 2011. "A repeat sales index robust to small datasets," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 29(1), pages 35-48, February.
    2. Deng, Yongheng & McMillen, Daniel P. & Sing, Tien Foo, 2014. "Matching indices for thinly-traded commercial real estate in Singapore," Regional Science and Urban Economics, Elsevier, vol. 47(C), pages 86-98.
    3. Wang, Ferdinand T. & Zorn, Peter M., 1997. "Estimating House Price Growth with Repeat Sales Data: What's the Aim of the Game?," Journal of Housing Economics, Elsevier, vol. 6(2), pages 93-118, June.
    4. 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).
    5. Victor Ginsburgh & Jianping Mei & Michael Moses, 2006. "On the computation of art indices in art," ULB Institutional Repository 2013/7290, ULB -- Universite Libre de Bruxelles.
    6. Deng, Yongheng & McMillen, Daniel P. & Sing, Tien Foo, 2012. "Private residential price indices in Singapore: A matching approach," Regional Science and Urban Economics, Elsevier, vol. 42(3), pages 485-494.
    7. Arthur Korteweg & Morten Sorensen, 2012. "Estimating Loan-to-Value and Foreclosure Behavior," NBER Working Papers 17882, National Bureau of Economic Research, Inc.
    8. Ghysels, Eric & Plazzi, Alberto & Valkanov, Rossen & Torous, Walter, 2013. "Forecasting Real Estate Prices," Handbook of Economic Forecasting, in: G. Elliott & C. Granger & A. Timmermann (ed.), Handbook of Economic Forecasting, edition 1, volume 2, chapter 0, pages 509-580, Elsevier.
    9. Richard Meese & Nancy Wallace, 2003. "House Price Dynamics and Market Fundamentals: The Parisian Housing Market," Urban Studies, Urban Studies Journal Limited, vol. 40(5-6), pages 1027-1045, May.
    10. Bourassa, Steven C. & Hoesli, Martin & Sun, Jian, 2006. "A simple alternative house price index method," Journal of Housing Economics, Elsevier, vol. 15(1), pages 80-97, March.
    11. Baroni, Michel & Barthélémy, Fabrice & Mokrane, Mahdi, 2004. "Physical Real Estate: A Paris Repeat Sales Residential Index," ESSEC Working Papers DR 04007, ESSEC Research Center, ESSEC Business School.
    12. John Y. Campbell & Stefano Giglio & Parag Pathak, 2011. "Forced Sales and House Prices," American Economic Review, American Economic Association, vol. 101(5), pages 2108-2131, August.
    13. Liang Peng, 2020. "Benchmarking Local Commercial Real Estate Returns: Statistics Meets Economics," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 48(4), pages 1004-1029, December.
    14. Marc Francke & Alex Van De Minne, 2022. "Daily appraisal of commercial real estate a new mixed frequency approach," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(5), pages 1257-1281, September.
    15. David Geltner & Bryan D. MacGregor & Gregory M. Schwann, 2003. "Appraisal Smoothing and Price Discovery in Real Estate Markets," Urban Studies, Urban Studies Journal Limited, vol. 40(5-6), pages 1047-1064, May.
    16. Alex Minne & Marc Francke & David Geltner & Robert White, 2020. "Using Revisions as a Measure of Price Index Quality in Repeat-Sales Models," The Journal of Real Estate Finance and Economics, Springer, vol. 60(4), pages 514-553, May.
    17. Erling Røed Larsen & Dag Einar Sommervoll, 2003. "Rising Inequality of Housing? Evidence from Segmented Housing Price Indices," Discussion Papers 363, Statistics Norway, Research Department.
    18. Carini Manuela & Ciuna Marina & De Ruggiero Manuela & Salvo Francesca & Simonotti Marco, 2017. "Repeat Assessed Values Model for Housing Price Index," Real Estate Management and Valuation, Sciendo, vol. 25(4), pages 25-39, December.
    19. Englund, Peter & Gordon, Tracy M. & Quigley, John M., 1999. "The Valuation of Real Capital: A Random Walk down Kungsgatan," Journal of Housing Economics, Elsevier, vol. 8(3), pages 205-216, September.
    20. Jiang, Liang & Phillips, Peter C.B. & Yu, Jun, 2015. "New methodology for constructing real estate price indices applied to the Singapore residential market," Journal of Banking & Finance, Elsevier, vol. 61(S2), pages 121-131.

    More about this item

    Keywords

    Real estate indexes; valuation-based index; repaet sales; risk factors;
    All these keywords.

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • G00 - Financial Economics - - General - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebg:essewp:dr-03002. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sophie Magnanou (email available below). General contact details of provider: https://edirc.repec.org/data/essecfr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.