Robust Hedonic Price Indexes

Steven Bourassa, Eva Cantoni and Martin Hoesli
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Eva Cantoni: University of Geneva

No 13-49, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Purpose ‒ The aim of this paper is to demonstrate the application of robust techniques to the estimation of hedonic house price indexes. Design/methodology/approach ‒ We use simulation analysis to compare an index estimated using ordinary least squares (OLS) with several indexes estimated using robust techniques. The analysis employs sales transactions data from a US city. We then explore how robust methods can correct for omitted variables under some circumstances and how they affect the revision problem that occurs when longitudinal hedonic indexes are updated. Findings ‒ Robust methods can resolved missing variable problems in some circumstances and also can substantially reduce the revision problem in longitudinal hedonic indexes. Practical implications ‒ Robust techniques may be preferable to OLS when constructing longitudinal hedonic indexes. Originality/value ‒ This is the first paper to undertake a systematic analysis of the applicability of robust techniques in constructing hedonic house price indexes.

Keywords: House price indexes; Hedonic models; Robust methods; Distressed sales (search for similar items in EconPapers)
JEL-codes: R31 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2013-10
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Related works:
Journal Article: Robust hedonic price indexes (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1349

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