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Accuracy and Robustness of House Price Index Methods

Author

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  • Yen Goh
  • Greg Costello
  • Greg Schwann

Abstract

We evaluate the statistical properties of five different house price index methods with the objective of identifying one that is most accurate and robust when estimated at frequent time intervals and for distinctly local markets. We adopt a split-sample technique to establish a consistent basis for comparison of the different price index methods. Our results demonstrate that if suitable data is available for estimation of price indexes, the arbitrary aggregation of data across time and geography is not warranted. One model, the ‘hedonic imputation’, outperforms alternative models on all measures of accuracy and robustness. Differences in levels of accuracy between different models are found to be statistically significant.

Suggested Citation

  • Yen Goh & Greg Costello & Greg Schwann, 2012. "Accuracy and Robustness of House Price Index Methods," Housing Studies, Taylor & Francis Journals, vol. 27(5), pages 643-666.
    • Handle: RePEc:taf:chosxx:v:27:y:2012:i:5:p:643-666
    DOI: 10.1080/02673037.2012.697551
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    Citations

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    Cited by:

    1. Greenaway-McGrevy, Ryan & Sorensen, Kade, 2021. "A Time-Varying Hedonic Approach to quantifying the effects of loss aversion on house prices," Economic Modelling, Elsevier, vol. 99(C).
    2. Shuping Shi & Arafat Rahman & Ben Zhe Wang, 2020. "Australian Housing Market Booms: Fundamentals or Speculation?☆," The Economic Record, The Economic Society of Australia, vol. 96(315), pages 381-401, December.
    3. Hill, Robert J. & Trojanek, Radoslaw, 2022. "An evaluation of competing methods for constructing house price indexes: The case of Warsaw," Land Use Policy, Elsevier, vol. 120(C).
    4. Shian Zeng & Chengdong Yi, 2022. "Impact of the COVID-19 pandemic on the housing market at the epicenter of the outbreak in China," SN Business & Economics, Springer, vol. 2(6), pages 1-20, June.
    5. Ming Li & Guojun Zhang & Yunliang Chen & Chunshan Zhou, 2019. "Evaluation of Residential Housing Prices on the Internet: Data Pitfalls," Complexity, Hindawi, vol. 2019, pages 1-15, February.
    6. Glumac, Brano & Herrera-Gomez, Marcos & Licheron, Julien, 2019. "A hedonic urban land price index," Land Use Policy, Elsevier, vol. 81(C), pages 802-812.
    7. Ryan Greenaway-McGrevy & Kade Sorensen, 2021. "A spatial model averaging approach to measuring house prices," Journal of Spatial Econometrics, Springer, vol. 2(1), pages 1-32, December.
    8. Rainer Schulz & Martin Wersing & Axel Werwatz, 2014. "Automated valuation modelling: a specification exercise," Journal of Property Research, Taylor & Francis Journals, vol. 31(2), pages 131-153, June.
    9. Reusens, Peter & Vastmans, Frank & Damen, Sven, 2023. "A new framework to disentangle the impact of changes in dwelling characteristics on house price indices," Economic Modelling, Elsevier, vol. 123(C).
    10. Alan G Phipps & Dingding Li, 2019. "Calibration and evaluation of Quigley’s hybrid housing price model in Microsoft Excel," PLOS ONE, Public Library of Science, vol. 14(4), pages 1-18, April.

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