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Improved Estimators of Hedonic Housing Price Models

  • Helen X. H. Bao

    ()

    (University of Cambridge 19 Silver Street Cambridge CB3 9EP, U.K)

  • Alan T. K. Wan

    ()

    (Department of Management Sciences, City University of Hong Kong Kowloon, Hong Kong)

In hedonic housing price modeling, real estate researchers and practitioners are often not completely ignorant about the parameters to be estimated. Experience and expertise usually provide them with tacit understanding of the likely values of the true parameters. Under this scenario, the subjective knowledge about the parameter value can be incorporated as non-sample information in the hedonic price model. This paper considers a class of Generalized Stein Variance Double k-class (GSVKK) estimators, which allows real estate practitioners to introduce potentially useful information about the parameter values into the estimation of hedonic pricing models. Data from the Hong Kong real estate market are used to investigate the estimators?performance empirically. Compared with the traditional Ordinary Lease Squares approach, the GSVKK estimators have smaller predictive mean squared errors and lead to more precise parameter estimates. Some results on the theoretical properties of the GSVKK estimators are also presented.

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Article provided by American Real Estate Society in its journal journal of Real Estate Research.

Volume (Year): 29 (2007)
Issue (Month): 3 ()
Pages: 267-302

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Handle: RePEc:jre:issued:v:29:n:3:2007:p:267-302
Contact details of provider: Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
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  1. Kazuhiro Ohtani & Alan Wan, 2002. "ON THE USE OF THE STEIN VARIANCE ESTIMATOR IN THE DOUBLE k-CLASS ESTIMATOR IN REGRESSION," Econometric Reviews, Taylor & Francis Journals, vol. 21(1), pages 121-134.
  2. Brownstone, David, 1990. "Bootstrapping improved estimators for linear regression models," Journal of Econometrics, Elsevier, vol. 44(1-2), pages 171-187.
  3. Steven C. BOURASSA & Martin HOESLI & Vincent S. PENG, 2002. "Do Housing Submarkets Really Matter?," FAME Research Paper Series rp58, International Center for Financial Asset Management and Engineering.
  4. Wan, Alan T. K. & Zou, Guohua, 2003. "Optimal critical values of pre-tests when estimating the regression error variance: analytical findings under a general loss structure," Journal of Econometrics, Elsevier, vol. 114(1), pages 165-196, May.
  5. Clapp, John M. & Wang, Yazhen, 2006. "Defining neighborhood boundaries: Are census tracts obsolete?," Journal of Urban Economics, Elsevier, vol. 59(2), pages 259-284, March.
  6. Goodman, Allen C. & Thibodeau, Thomas G., 1998. "Housing Market Segmentation," Journal of Housing Economics, Elsevier, vol. 7(2), pages 121-143, June.
  7. J. R. Knight & R. Carter Hill & C. F. Sirmans, 1992. "Biased Prediction of Housing Values," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 20(3), pages 427-456.
  8. Alan Wan & Anoop Chaturvedi & Guohuazou Zou, 2003. "Unbiased estimation of the MSE matrices of improved estimators in linear regression," Journal of Applied Statistics, Taylor & Francis Journals, vol. 30(2), pages 173-189.
  9. Chi, Xie Wen & Judge, George, 1985. "On assessing the precision of Stein's estimator," Economics Letters, Elsevier, vol. 18(2-3), pages 143-148.
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