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A house price index defined in the potential outcomes framework

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Author Info
Nicholas Longford ()
Abstract

Current methods for constructing house price indices are based on comparisons of sale prices of residential properties sold two or more times and on regression of the sale prices on the attributes of the properties and of their locations. The two methods have well recognised deficiencies, selection bias and model assumptions, respectively. We introduce a new method based on propensity score matching. The average house prices for two periods are compared by selecting pairs of properties, one sold in each period, that are as similar on a set of available attributes (covariates) as is feasible to arrange. The uncertainty associated with such matching is addressed by multiple imputation, framing the problem as involving missing values. The method is applied to aregister of transactions ofresidential properties in New Zealand and compared with the established alternatives.

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Publisher Info
Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1175.

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Date of creation: Oct 2009
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Handle: RePEc:upf:upfgen:1175

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Web page: http://www.econ.upf.edu/

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Related research
Keywords: Hedonic regression; house prices; matching; potential outcomes; propensity scoring; repeat-sales method;

Find related papers by JEL classification:
C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General
C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation
C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Statistical Simulation Methods
C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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  1. Gatzlaff, Dean H & Haurin, Donald R, 1997. "Sample Selection Bias and Repeat-Sales Index Estimates," The Journal of Real Estate Finance and Economics, Springer, vol. 14(1-2), pages 33-50, Jan.-Marc. [Downloadable!] (restricted)
  2. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb.. [Downloadable!] (restricted)
  3. Goodman, Allen C., 1978. "Hedonic prices, price indices and housing markets," Journal of Urban Economics, Elsevier, vol. 5(4), pages 471-484, October. [Downloadable!] (restricted)
  4. Harrison, David Jr. & Rubinfeld, Daniel L., 1978. "Hedonic housing prices and the demand for clean air," Journal of Environmental Economics and Management, Elsevier, vol. 5(1), pages 81-102, March. [Downloadable!] (restricted)
  5. Rosenbaum, Paul R. & Ross, Richard N. & Silber, Jeffrey H., 2007. "Minimum Distance Matched Sampling With Fine Balance in an Observational Study of Treatment for Ovarian Cancer," Journal of the American Statistical Association, American Statistical Association, vol. 102, pages 75-83, March. [Downloadable!] (restricted)
  6. Kiel, Katherine A & Zabel, Jeffrey E, 1997. "Evaluating the Usefulness of the American Housing Survey for Creating House Price Indices," The Journal of Real Estate Finance and Economics, Springer, vol. 14(1-2), pages 189-202, Jan.-Marc. [Downloadable!] (restricted)
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This page was last updated on 2009-11-27.

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