Estimating Property Values by Replication: An Alternative to the Traditional Grid and Regression Methods

Tsong-Yue Lai (), Kerry Vandell (), Ko Wang () and Gerd Welke ()
Additional contact information
Tsong-Yue Lai: California State University Fullerton P.O. Box 6848, Fullerton, CA 92834
Kerry Vandell: University of California, Irvine The Paul Merage School of Business, Irvine, CA 92697
Gerd Welke: Baruch College 137 E. 22nd Street, New York, NY 10010

Journal of Real Estate Research, 2008, vol. 30, issue 4, pages 441-460

Abstract: This paper proposes and develops a replication method for estimating property values, in which optimal weights of comparable property attributes that best duplicate the subject property are determined. In a setting where the number of comparables is large compared to the number of attributes, replication weakly outperforms traditional general least squares regression by making use of potential correlations in the error structure. A similar result obtains in comparison to the grid method, which may suffer from subjective price adjustment factors. The replication method suggests using a large sample regression analysis to obtain the functional form of the error variance-covariance, and then replicating the subject with a smaller, attribute-close set of comparable properties.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 2008

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