Calibration and evaluation of Quigley’s hybrid housing price model in Microsoft Excel

Alan G Phipps and Dingding Li

PLOS ONE, 2019, vol. 14, issue 4, 1-18

Abstract: Quigley derived his hybrid price model to improve the precision of predicted prices of sold homes by statistically merging data of resold homes in a repeat sales model with that of once-sold homes in a single sales hedonic price model. The literature has few applications of the hybrid model aside from those by Quigley and his collaborators. Two reasons for this underuse may be its computational intensiveness and its marginal empirical improvement in comparison with two other models. This paper first demystifies this computational intensiveness by calibrating models in Microsoft Excel with transferable procedures into other software. It second evaluates the hybrid price model’s empirical improvement as a reason for its underuse by predicting prices of 2,559 sold and resold homes observed in two inner-city neighbourhoods in Windsor, Ontario, during a 30-year period. The results as hypothesized are its lower standard errors of regression coefficients and higher simple R-squared than those of a single sales hedonic price model. Moreover, the hybrid model’s predictions have higher correlations than those of the single sales model with not only in-sample observed prices or changes in prices but also out-of-sample ones. The conclusion speculates in plans for future research about reasons for two models’ similar or dissimilar regression coefficients and standard errors predicting correspondingly similar or dissimilar sale prices of homes through time.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:plo:pone00:0215954

DOI: 10.1371/journal.pone.0215954

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