The Correct use of Confidence Intervals and Regression Analysis in Determining the Value of Residential Homes
Donald R. Epley and
Real Estate Economics, 1978, vol. 6, issue 1, 70-85
This paper shows that (1) the principle of substitution has been misinterpreted in regression analysis on residential homes by the misuse of the confidence interval; (2) the proper confidence interval to judge the accuracy of the equation is the mean CI; and (3) the accuracy of the equation can be improved by applying factor analysis to the entire data set rather than a predetermined neighborhood. These results are illustrated in a sample of 571 residential sales in Northwest Arkansas during 1975. The data are divided into clusters, and a regression equation is computed for each. The results show that the mean confidence interval is the correct application of the principle of substitution. The correct decision rule to determine the superiority of the multi‐equation or the single equation model compares the explained to the unexplained variation. These results should allow the appraiser to select properties that are better suited for comparison. This will improve the accuracy of the regression analysis and resulting estimates of property value.
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bla:reesec:v:6:y:1978:i:1:p:70-85
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1080-8620
Access Statistics for this article
Real Estate Economics is currently edited by Crocker Liu, N. Edward Coulson and Walter Torous
More articles in Real Estate Economics from American Real Estate and Urban Economics Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().