The Use of Least Median of Squares in the Estimation of Land Value Equations

James A Thorson

The Journal of Real Estate Finance and Economics, 1994, vol. 8, issue 2, 183-90

Abstract: Ordinary least squares (OLS) regression is relatively sensitive to the presence of outliers in a data set. In this paper, a robust estimation method, least median of squares (LMS) is used to identify outliers in land value data. Once the outliers are identified, the land value equations are re-estimated. The results show that a few observations can have a significant effect on the estimated coefficients. Finally, the observations which were identified as outliers were examined in more detail. One cause of outliers is an omitted variable. In this case, a large fraction of the outliers were found to be observations with high development potential. Copyright 1994 by Kluwer Academic Publishers

Date: 1994
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