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Non-temporal Components of Residential Real Estate Appreciation

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Author Info

  • Goetzmann, W.N.
  • Spiegel, M.

Abstract

This paper separates the components of capital appreciation returns in an asset market into fixed and stochastic portions. It proposes a control for the problem of fixed components in the capital appreciation return used in transactions-based return estimates. We find a consistent bias in the index resulting from repeat sales regressions which may be eliminated through simple methods. The sign and magnitude of the bias, as well as its systematic variation across property, suggest that it is caused by incremental home improvements, as well as by price risk. We propose a maximum likelihood method for estimating the first and second moments of the fixed and temporal components of real estate returns that relies upon relatively small samples. Copyright 1995 by MIT Press.

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Bibliographic Info

Paper provided by Columbia - Graduate School of Business in its series Papers with number 92-20.

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Length: 38 pages
Date of creation: 1992
Date of revision:
Handle: RePEc:fth:colubu:92-20

Contact details of provider:
Postal: U.S.A.; COLUMBIA UNIVERSITY, GRADUATE SCHOOL OF BUSINESS, PAINE WEBBER , New York, NY 10027 U.S.A
Phone: (212) 854-5553
Web page: http://www.columbia.edu/cu/business/
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Keywords: capital ; regression analysis;

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Cited by:
  1. James Bugden, 2013. "Renovations and the Repeat-Sales House Price Index," Working Papers 2013.08, School of Economics, La Trobe University.
  2. Stephen Billings & Thomas Thibodeau, 2011. "Intrametropolitan Decentralization: Is Government Structure Capitalized in Residential Property Values?," The Journal of Real Estate Finance and Economics, Springer, vol. 42(4), pages 416-450, May.
  3. Dorsey, Robert E. & Hu, Haixin & Mayer, Walter J. & Wang, Hui-chen, 2010. "Hedonic versus repeat-sales housing price indexes for measuring the recent boom-bust cycle," Journal of Housing Economics, Elsevier, vol. 19(2), pages 75-93, June.
  4. Abel Cadenillas & Robert Elliott & Hong Miao & Zhenyu Wu, 2009. "Risk-Hedging in Real Estate Markets," Asia-Pacific Financial Markets, Springer, vol. 16(4), pages 265-285, December.
  5. Michel Baroni & Fabrice Barthe´le´my & Mahdi Mokrane, 2007. "APCA Factor Repeat Sales Index for Apartment Prices in Paris," Journal of Real Estate Research, American Real Estate Society, vol. 29(2), pages 137-158.
  6. Philippe Bracke, 2013. "House Prices and Rents: Micro Evidence from a Matched Dataset in Central London_x0003_," ERSA conference papers ersa13p112, European Regional Science Association.
  7. Michel Baroni & Fabrice Barthélémy & Mokrane Mahdi, 2009. "A Repeat Sales Index Robust to Small Datasets," Post-Print hal-00551732, HAL.
  8. Joseph Gyourko & Joseph Tracy, 2003. "Using home maintenance and repairs to smooth variable earnings," Staff Reports 168, Federal Reserve Bank of New York.
  9. Marvin L. Wolverton & Jimmy Senteza, 2000. "Hedonic Estimates of Regional Constant Quality House Prices," Journal of Real Estate Research, American Real Estate Society, vol. 19(3), pages 235-253.
  10. Marilena Locatelli Biey & Roberto Zanola, 1999. "Investment in Paintings: A Short-Run Price Index," Journal of Cultural Economics, Springer, vol. 23(3), pages 209-219, August.
  11. Billings, Stephen B., 2011. "Estimating the value of a new transit option," Regional Science and Urban Economics, Elsevier, vol. 41(6), pages 525-536.
  12. James Bugden, 2014. "Quality-Adjusted Repeat-Sale House Price Indices," Working Papers 2014.01, School of Economics, La Trobe University.
  13. Dubé, Jean & Thériault, Marius & Des Rosiers, François, 2013. "Commuter rail accessibility and house values: The case of the Montreal South Shore, Canada, 1992–2009," Transportation Research Part A: Policy and Practice, Elsevier, vol. 54(C), pages 49-66.
  14. James Hansen, 2006. "Australian House Prices: A Comparison of Hedonic and Repeat-sales Measures," RBA Research Discussion Papers rdp2006-03, Reserve Bank of Australia.
  15. Dröes, Martijn I. & Hassink, Wolter H.J., 2013. "House price risk and the hedging benefits of home ownership," Journal of Housing Economics, Elsevier, vol. 22(2), pages 92-99.
  16. William Goetzmann & Matthew Spiegel, 2000. "The Policy Implications of Portfolio Choice in Underserved Mortgage Markets," Yale School of Management Working Papers ysm161, Yale School of Management, revised 01 Mar 2001.

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