An Evaluation of Alternative Estimation Techniques and Functional Forms in Developing Statistical Appraisal Models
This paper examines the combined effects of multicollinearity, parameter stability, and alternative function forms in hedonic regression models. The results indicate that the significance and stability of the regression coefficients as well as prediction accuracy are sensitive to the choice of functional form and estimation technique. In certain respects nonlinear models proved to be more effective than linear models and ridge regression techniques were generally superior to OLS estimation. Since no single estimation technique or functional form was superior in all respects, the appraiser may have to choose between minimizing the average prediction error or maximizing prediction stability.
Volume (Year): 2 (1987)
Issue (Month): 1 ()
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- Quigley, John M., 1982. "Nonlinear budget constraints and consumer demand: An application to public programs for residential housing," Journal of Urban Economics, Elsevier, vol. 12(2), pages 177-201, September.
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- Jan K. Brueckner & Peter F. Colwell, 1983. "A Spatial Model of Housing Attributes: Theory and Evidence," Land Economics, University of Wisconsin Press, vol. 59(1), pages 58-69.
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- Timothy P. Cronan & Donald R. Epley & Larry G. Perry, 1986. "The Use of Rank Transformation and Multiple Regression Analysis in Estimating Residential Property Values With A Small Sample," Journal of Real Estate Research, American Real Estate Society, vol. 1(1), pages 19-31.
- Jonathan H. Mark, 1983. "An Empirical Examination of the Stability of Housing Price Equations Over Time," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 11(3), pages 397-415.
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