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Multiple Transactions Model: A Panel Data Approach to Estimate Housing Market Indices

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  • Andre H. Gao

    ()
    (Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, DC 20016)

  • George H. K. Wang

    ()
    (George Mason University, Fairfax, Virginia 22030)

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    Abstract

    In this paper, a multiple transactions model with a panel data approach is used to estimate housing market indices. The multiple transactions model keeps the same features of the repeat transactions index model (i.e., tracking the price appreciation of same houses). However, the multiple transactions model overcomes the shortcomings of the repeat transactions model by avoiding the correlated error terms. The indicative empirical analysis on a small sample of actual house transaction data demonstrates that the proposed multiple transactions model is superior to the repeat transactions model in terms of index variance, robustness of estimate, index revision volatility, and out-of-sample prediction of individual house prices.

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    File URL: http://aux.zicklin.baruch.cuny.edu/jrer/papers/pdf/past/vol29n03/02.241_266.pdf
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    Bibliographic Info

    Article provided by American Real Estate Society in its journal journal of Real Estate Research.

    Volume (Year): 29 (2007)
    Issue (Month): 3 ()
    Pages: 241-266

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    Handle: RePEc:jre:issued:v:29:n:3:2007:p:241-266

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    Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
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    Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
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    Web: http://aux.zicklin.baruch.cuny.edu/jrer/about/get.htm

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    References

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    1. J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
    2. Jesse M. Abraham & William S. Schauman, 1991. "New Evidence on Home Prices from Freddie Mac Repeat Sales," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(3), pages 333-352.
    3. Palmquist, Raymond B, 1980. "Alternative Techniques for Developing Real Estate Price Indexes," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 442-48, August.
    4. Case, Bradford & Quigley, John M, 1991. "The Dynamics of Real Estate Prices," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 50-58, February.
    5. Gabor Kezdi, 2005. "Robus Standard Error Estimation in Fixed-Effects Panel Models," Econometrics 0508018, EconWPA.
    6. Bradford Case & Henry O. Pollakowski & Susan M. Wachter, 1991. "On Choosing Among House Price Index Methodologies," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(3), pages 286-307.
    7. Anthony Y. Gu, 2002. "The Predictability of House Prices," Journal of Real Estate Research, American Real Estate Society, vol. 24(3), pages 213-234.
    8. Englund, Peter & Quigley, John M. & Redfearn, Christian L., 1998. "Improved Price Indexes for Real Estate: Measuring the Course of Swedish Housing Prices," Journal of Urban Economics, Elsevier, vol. 44(2), pages 171-196, September.
    9. Richard Meese & Nancy Wallace, 1991. "Nonparametric Estimation of Dynamic Hedonic Price Models and the Construction of Residential Housing Price Indices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(3), pages 308-332.
    10. Zhong-guo Zhou, 1997. "Forecasting Sales and Price for Existing Single-Family Homes: A VAR Model with Error Correction," Journal of Real Estate Research, American Real Estate Society, vol. 14(2), pages 155-168.
    11. G. Donald Jud & Dan T. Winkler, 2002. "The Dynamics of Metropolitan Housing Prices," Journal of Real Estate Research, American Real Estate Society, vol. 23(1/2), pages 29-46.
    12. Clapp, John M & Giaccotto, Carmelo, 1992. "Estimating Price Trends for Residential Property: A Comparison of Repeat Sales and Assessed Value Methods," The Journal of Real Estate Finance and Economics, Springer, vol. 5(4), pages 357-74, December.
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