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A PCA Factor Repeat Sales Index (1973-2001) To Forecast Apartment Prices in Paris (France)

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Author Info

  • Baroni, Michel

    ()
    (ESSEC Business School)

  • Barthélémy, Fabrice

    ()
    (THEMA, Université de Cergy-Pontoise)

  • Mokrane, Mahdi

    ()
    (IXIS-AEW Europe)

Abstract

In this paper we address the issue of building a repeat sales index, based on factors. This is an extension of a companion paper, Baroni, Barthélémy and Mokrane (2001, BBM) in which we had built a factorial index as a selected linear function of existing economics and financial variables. Here we offer a more general and robust model based on a Principal Components Analysis (PCA). We apply this methodology to the Paris residential market. We use the CD-BIEN database that contains more than 220 000 repeat sales transactions for residential apartments in the Paris area covering the period 1973-2001 period. Our PCA index for the Paris and close surrounding area is estimated and its characteristics and robustness are analysed depending on: estimation period, choice of observations, periodicity and reversibility. We then compare it to the traditional WRS repeat sales index developed by Case & Shiller (1987). Finally we show that contrary to the WRS index, our index can be used to forecast apartment prices.

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Bibliographic Info

Paper provided by ESSEC Research Center, ESSEC Business School in its series ESSEC Working Papers with number DR 05002.

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Length: 36 pages
Date of creation: Feb 2005
Date of revision:
Handle: RePEc:ebg:essewp:dr-05002

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Postal: ESSEC Research Center, BP 105, 95021 Cergy, France
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Web page: http://www.essec.edu/
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Related research

Keywords: Real estate indices; Repeat sales; Factors; PCA; Index forecasting;

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  1. Brown, Gerald R & Matysiak, George A, 2000. "Sticky Valuations, Aggregation Effects, and Property Indices," The Journal of Real Estate Finance and Economics, Springer, vol. 20(1), pages 49-66, January.
  2. 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.
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