Quantifying the reversibility phenomenon for the repeat-sales index

Arnaud Simon ()
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Arnaud Simon: Universit?Paris Dauphine Place du Maréchal de Lattre-de-Tassigny, 75775 Paris Cedex 16

Journal of Real Estate Research, 2009, vol. 31, issue 1, pages 27-62

Abstract: The reversibility phenomenon in the repeat-sales index is a serious obstacle for derivatives products. This article provides a solution for this problem, using an informational reformulation of the RSI framework. We present first a theoretical formula (simple, easy to interpret, and easy to handle) and then implement it. For the derivatives our technique has strong implications for the choice of underlying index and contract settlement. Even if reversibility of the RSI is probably higher compared with the hedonic approach, this index remains a challenger because of the predictability and quantifiability of its revisions.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 2009
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