Sampling Frequency and the Comparison between Matched-Model and Hedonic Regression Price Indexes

George Deltas () and Eleftherios Zacharias

Journal of Business & Economic Statistics, 2004, vol. 22, issue 1, 94-106

Abstract: Matched-model price indexes generally overestimate quality-adjusted prices, because the price/performance ratio of models sold in consecutive periods is worse than that of new models. This "unrepresentativeness" of the sample potentially might be reduced by obtaining higher-frequency data, thus increasing the fraction of models that are matched. We propose a set of conformable indexes to test this hypothesis. Using computer prices from the Buy Direct press, we find, contrary to initial expectations, that the bias in the matched-model price index increases with the sampling frequency. The bias is reduced if the high-frequency index is constructed using only long-lived models. These results suggest that models that last for only a brief time are models for which the price/performance ratio has deteriorated very rapidly. Thus increasing the sampling frequency without purging short-lived models actually increases the selection bias.

Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:bes:jnlbes:v:22:y:2004:i:1:p:94-106

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