An Evaluation of Alternative Estimation Techniques and Functional Forms in Developing Statistical Appraisal Models
AbstractThis paper examines the combined effects of multicollinearity, parameter stability, and alternative function forms in hedonic regression models. The results indicate that the significance and stability of the regression coefficients as well as prediction accuracy are sensitive to the choice of functional form and estimation technique. In certain respects nonlinear models proved to be more effective than linear models and ridge regression techniques were generally superior to OLS estimation. Since no single estimation technique or functional form was superior in all respects, the appraiser may have to choose between minimizing the average prediction error or maximizing prediction stability.
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Bibliographic InfoArticle provided by American Real Estate Society in its journal Journal of Real Estate Research.
Volume (Year): 2 (1987)
Issue (Month): 1 ()
Contact details of provider:
Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
Web page: http://www.aresnet.org/
Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
Find related papers by JEL classification:
- L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
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- Jonathan H. Mark, 1983. "An Empirical Examination of the Stability of Housing Price Equations Over Time," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 11(3), pages 397-415.
- Timothy P. Cronan & Donald R. Epley & Larry G. Perry, 1986. "The Use of Rank Transformation and Multiple Regression Analysis in Estimating Residential Property Values With A Small Sample," Journal of Real Estate Research, American Real Estate Society, vol. 1(1), pages 19-31.
- James S. Moore & Alan K. Reicheri & Chien-Ching Cho, 1984. "Analyzing the Temporal Stability of Appraisal Model Coefficients: An Application of Ridge Regression Techniques," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 12(1), pages 50-71.
- Brown, Jeff E. & Ethridge, Don E., 1995. "Functional Form Model Specification: An Application To Hedonic Pricing," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 24(2), October.
- Han Bin Kang & Mona J. Gardner, 1989. "Selling Price and Marketing Time in the Residential Real Estate Market," Journal of Real Estate Research, American Real Estate Society, vol. 4(1), pages 21-35.
- Marvin L. Wolverton, 1998. "Empirical Investigation into the Limitations of the Normative Paired Sales Adjustment Method," Journal of Real Estate Research, American Real Estate Society, vol. 15(2), pages 191-204.
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