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Improved Estimators of Hedonic Housing Price Models

Author

Listed:
  • Helen X. H. Bao

    (University of Cambridge 19 Silver Street Cambridge CB3 9EP, U.K)

  • Alan T. K. Wan

    (Department of Management Sciences, City University of Hong Kong Kowloon, Hong Kong)

Abstract

In hedonic housing price modeling, real estate researchers and practitioners are often not completely ignorant about the parameters to be estimated. Experience and expertise usually provide them with tacit understanding of the likely values of the true parameters. Under this scenario, the subjective knowledge about the parameter value can be incorporated as non-sample information in the hedonic price model. This paper considers a class of Generalized Stein Variance Double k-class (GSVKK) estimators, which allows real estate practitioners to introduce potentially useful information about the parameter values into the estimation of hedonic pricing models. Data from the Hong Kong real estate market are used to investigate the estimators?performance empirically. Compared with the traditional Ordinary Lease Squares approach, the GSVKK estimators have smaller predictive mean squared errors and lead to more precise parameter estimates. Some results on the theoretical properties of the GSVKK estimators are also presented.

Suggested Citation

  • Helen X. H. Bao & Alan T. K. Wan, 2007. "Improved Estimators of Hedonic Housing Price Models," Journal of Real Estate Research, American Real Estate Society, vol. 29(3), pages 267-302.
    • Handle: RePEc:jre:issued:v:29:n:3:2007:p:267-302
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    References listed on IDEAS

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    Cited by:

    1. Ansgar Belke & Jonas Keil, 2018. "Fundamental Determinants of Real Estate Prices: A Panel Study of German Regions," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 24(1), pages 25-45, February.
    2. Zhang, Xinyu & Chen, Ti & Wan, Alan T.K. & Zou, Guohua, 2009. "Robustness of Stein-type estimators under a non-scalar error covariance structure," Journal of Multivariate Analysis, Elsevier, vol. 100(10), pages 2376-2388, November.
    3. Julian D Olden & Mariana Tamayo, 2014. "Incentivizing the Public to Support Invasive Species Management: Eurasian Milfoil Reduces Lakefront Property Values," PLOS ONE, Public Library of Science, vol. 9(10), pages 1-6, October.
    4. Magnus, Jan R. & Wan, Alan T.K. & Zhang, Xinyu, 2011. "Weighted average least squares estimation with nonspherical disturbances and an application to the Hong Kong housing market," Computational Statistics & Data Analysis, Elsevier, vol. 55(3), pages 1331-1341, March.
    5. Ahmed, S. Ejaz & Nicol, Christopher J., 2012. "An application of shrinkage estimation to the nonlinear regression model," Computational Statistics & Data Analysis, Elsevier, vol. 56(11), pages 3309-3321.

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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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