PRINCIPLES FOR CALCULATING AVM PERFORMANCE METRICS

Hans Isakson, Mark D. Ecker and Lee Kennedy

The Valuation Journal, 2020, vol. 16, issue 2, 38-69

Abstract: An analysis of 5.3 million housing sales suggests that there are fundamental shortcomings with how automated valuation model (AVM) vendors currently calculate their AVM performance metrics, in particular the forecast standard deviation. The analysis demonstrates that the methodology used to calculate the values of performance metrics meaningfully impacts an AVM’s credibility. This article proposes consistent methodologies to calculate AVM performance metrics that comply with well-established appraisal principles and allow a consistent evaluation and comparison of AVM performance. A case study’s research AVM empirically illustrates that not following these principles yields overly optimistic AVM performance metric values.

JEL-codes: C15 C53 R3 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:vaj:journl:v:16:y:2020:i:2:p:38-69

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