A Hybrid Cost and Market-Based Estimator for Appraisal
Straightforward application of OLS to statistical mass appraisal models does not always produce defensible estimates due to debilitating levels of multicollinearity in the data as appraisers attempt to improve the predictive ability of their models through the inclusion of a long list of correlated property characteristics. The traditional cost approach does not suffer from this malady, but often does not predict market values well. An ideal assessment method would combine the predictive power of statistical appraisal models with the lack of cross-sectional error from the cost approach. This paper presents such a method and demonstrates its advantages both theoretically and empirically. The hybrid estimator, based upon a priori information and current market data is superior in prediction to standard OLS estimation under a variety of conditions. This superiority is demonstrated through cross-validation on random hold-out samples of various sizes.
Volume (Year): 5 (1990)
Issue (Month): 1 ()
|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|
Web page: http://www.aresnet.org/
|Order Information:|| Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323|
Web: http://pages.jh.edu/jrer/about/get.htm Email:
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kerry D. Vandell & Robert H. Zerbst, 1984. "Estimates of the Effect of School Desegregation Plans on Housing Values Over Time," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 12(2), pages 109-135.
- Alan K. Reichert & James S. Moore, 1986. "Using Latent Root Regression to Identify Nonpredictive Collinearity in Statistical Appraisal Models," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 14(1), pages 136-152.
- Anderson, John E., 1981. "Ridge estimation of house value determinants," Journal of Urban Economics, Elsevier, vol. 9(3), pages 286-297, May.
- James S. Moore & Alan K. Reicheri & Chien-Ching Cho, 1984. "Analyzing the Temporal Stability of Appraisal Model Coefficients: An Application of Ridge Regression Techniques," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 12(1), pages 50-71.
When requesting a correction, please mention this item's handle: RePEc:jre:issued:v:5:n:1:1990:p:75-88. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (JRER Graduate Assistant/Webmaster)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.