A repeat sales index robust to small datasets

Michel Baroni (), Fabrice Barthélémy () and Mahdi Mokrane

Journal of Property Investment & Finance, 2011, vol. 29, issue 1, 35-48

Abstract: Purpose - This paper aims to test the robustness of the trend and volatility estimations for two indices: the classical Weighted Repeat Sales and a PCA factorial index. The estimations are computed from a dataset of Paris commercial properties. Design/methodology/approach - First, two methodologies are presented, and then the dataset. Finally, the impact of the number of transactions per period are tested on the trend and volatility estimates for each index, and an interpretation of the results are given. Findings - The trend and volatility estimates are biased for the WRS index and not for the PCA factorial index when the periodicity increases. Consequently, the level of the index at the end of the computing period is significantly different for various periodicities in the case of the WRS index. Globally, the PCA factorial seems to be more robust to the number of transactions. Originality/value - As suggested by D. Geltner, commercial properties indices have to be built using repeat sales instead of hedonic indices. The repeat sales method is a means of constructing real estate price indices based on a repeated observation of property transactions. These indices may be used as benchmarks for real estate portfolio managers. But the investors, in general, are also interested in introducing real estate performance in their portfolio to enhance the efficient frontier. Thus, expected return and volatility are the two key parameters. To create and to improve contracts on real estate indices, trend and volatility of these indices must be robust regarding to the periodicity of the index and the volume of transactions.

Keywords: Sales information; Indexing; Transaction costs; Real estate; France (search for similar items in EconPapers)
Date: 2011
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Related works:
Working Paper: A repeat sales index Robust to small datasets (2009)
Working Paper: A repeat sales index robust to small datasets (2009)
Working Paper: A Repeat Sales Index Robust to Small Datasets (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jpifpp:v:29:y:2011:i:1:p:35-48

DOI: 10.1108/14635781111100182

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