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Impact of the Regularization of Regression Models on the Results of the Mass Valuation of Real Estate

Gnat Sebastian ()
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Gnat Sebastian: University of Szczecin, Institute of Economics and Finance, Mickiewicza 64, 71-101Szczecin, Poland

Folia Oeconomica Stetinensia, 2020, vol. 20, issue 1, 163-176

Abstract: Research background: Mass appraisal is a process in which multiple properties are appraised simultaneously, with a uniform approach. One of the tools that can be used in this area are multiple regression models. In the valuation of real estate features are often described on an ordinal or nominal scale. Replacing them with dummy variables with an insufficient number of observations leads to multicollinearity. On the other hand, there is a risk of overfitting the model. One of the ways to eliminate or weaken these phenomena is to introduce regularization based on a model’s penalization for the high values of its weights.

Keywords: property valuation; market analysis; regularization (search for similar items in EconPapers)
JEL-codes: C10 R30 (search for similar items in EconPapers)
Date: 2020
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Handle: RePEc:vrs:foeste:v:20:y:2020:i:1:p:163-176:n:9