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A PCA Factor Repeat Sales Index (1973-2001) To Forecast Apartment Prices in Paris (France)

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Abstract

In this paper we address the issue of building a repeat sales index, based on factors. This is an extension of a companion paper, Baroni, Barthélémy and Mokrane (2001, BBM) in which we had built a factorial index as a selected linear function of existing economics and financial variables. Here we offer a more general and robust model based on a Principal Components Analysis (PCA). We apply this methodology to the Paris residential market. We use the CD-BIEN database that contains more than 220 000 repeat sales transactions for residential apartments in the Paris area covering the period 1973-2001 period. Our PCA index for the Paris and close surrounding area is estimated and its characteristics and robustness are analysed depending on: estimation period, choice of observations, periodicity and reversibility. We then compare it to the traditional WRS repeat sales index developed by Case & Shiller (1987). Finally we show that contrary to the WRS index, our index can be used to forecast apartment prices.

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  • Baroni, Michel & Barthélémy, Fabrice & Mokrane, Mahdi, 2005. "A PCA Factor Repeat Sales Index (1973-2001) To Forecast Apartment Prices in Paris (France)," ESSEC Working Papers DR 05002, ESSEC Research Center, ESSEC Business School.
    • Handle: RePEc:ebg:essewp:dr-05002
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    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. 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.
    3. Mahdi Mokrane & Michel Baroni, 2001. "Physical Real Estate : Risk Factors and Investor Behaviour," ERES eres2001_236, European Real Estate Society (ERES).
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    2. Marie-Léandre Gomez, 2009. "Knowledge Dynamics During Planning Practices," Post-Print hal-00554798, HAL.
    3. Giraud, Gaël & Renouard, Cécile, 2011. "Is the Veil of Ignorance Transparent?," OEconomia, Editions NecPlus, vol. 2011(02), pages 239-258, June.
    4. André Fourçans & Jonathan Benchimol, 2009. "Money in a DSGE framework with an application to the Euro Zone," Post-Print hal-00553495, HAL.
    5. Besancenot, Damien & Vranceanu, Radu, 2011. "Banks' risk race: A signaling explanation," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 784-791, October.
    6. Naiditch, Claire & Vranceanu, Radu, 2011. "Remittances as a social status signaling device," Research in Economics, Elsevier, vol. 65(4), pages 305-318, December.
    7. Giraud , Gaël & Renouard, Cécile, 2009. "Relational Capability: An Indicator of Collective Empowerment," ESSEC Working Papers DR 09012, ESSEC Research Center, ESSEC Business School.
    8. Besancenot, Damien & Huynh, Kim & Vranceanu, Radu, 2009. "Desk rejection in an academic publication market model with matching frictions," ESSEC Working Papers DR 09008, ESSEC Research Center, ESSEC Business School.
    9. Akoka, Jacky & Comyn-wattiau, Isabelle & Prat, Nicolas, 2009. "Combining Objects with Rules to Represent Aggregation Knowledge in Data Warehouse and OLAP Systems," ESSEC Working Papers DR 09014, ESSEC Research Center, ESSEC Business School.
    10. Nicolas Prat & Isabelle Comyn-Wattiau & Jacky Akoka, 2009. "Combining Objects with Rules to Represent Aggregation Knowledge in Data Warehouse and OLAP Systems," Post-Print hal-00551866, HAL.
    11. Marie-Léandre Gomez & Isabelle Bouty, 2009. "The Social Dimensions of Idea Work in Haute Cuisine: A Bourdieusian Perspective," Post-Print hal-00553515, HAL.
    12. Bouty, Isabelle & Gomez, Marie-Léandre, 2009. "The Social Dimensions of Idea Work in Haute Cuisine: A Bourdieusian Perspective," ESSEC Working Papers DR 09010, ESSEC Research Center, ESSEC Business School.
    13. Marie-Léandre Gomez & Isabelle Bouty, 2009. "Unpacking Knowing Integration: A Practice-based Study in Haute Cuisine," Post-Print hal-00554745, HAL.
    14. Gomez, Marie-Léandre, 2009. "Knowledge Dynamics During Planning Practices," ESSEC Working Papers DR 09011, ESSEC Research Center, ESSEC Business School.
    15. GOMEZ, Marie-Léandre, 2007. "A Bourdieusian Perspective on Strategizing," ESSEC Working Papers DR 07024, ESSEC Research Center, ESSEC Business School.
    16. Jacques Potin, 2009. "The selection effect of two-way trade in the Melitz model: an alternative approach," Post-Print hal-00554724, HAL.
    17. Bouty, Isabelle & Gomez, Marie-Léandre, 2009. "Unpacking Knowing Integration: A Practice-based Study in Haute Cuisine," ESSEC Working Papers DR 09009, ESSEC Research Center, ESSEC Business School.

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    More about this item

    Keywords

    Real estate indices; Repeat sales; Factors; PCA; Index forecasting;
    All these keywords.

    JEL classification:

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

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