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Testing machine learning systems in real estate

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  • Wayne Xinwei Wan
  • Thies Lindenthal

Abstract

Uncertainty about the inner workings of machine learning (ML) models holds back the application of ML‐enabled systems in real estate markets. How do ML models arrive at their estimates? Given the lack of model transparency, how can practitioners guarantee that ML systems do not run afoul of the law? This article first advocates a dedicated software testing framework for applied ML systems, as commonly found in computer science. Second, it demonstrates how system testing can verify that applied ML models indeed perform as intended. Two system‐testing procedures developed for ML image classifiers used in automated valuation models (AVMs) illustrate the approach.

Suggested Citation

  • Wayne Xinwei Wan & Thies Lindenthal, 2023. "Testing machine learning systems in real estate," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 51(3), pages 754-778, May.
    • Handle: RePEc:bla:reesec:v:51:y:2023:i:3:p:754-778
    DOI: 10.1111/1540-6229.12416
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