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Heteroscedasticity in hedonic house price models

Author

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  • M. Fletcher
  • P. Gallimore
  • J. Mangan

Abstract

This paper extends the work of Goodman and Thibodeau which examines heteroscedasticity in hedonic house price models. It investigates whether heteroscedasticity is related to other factors as well as age, since correcting for only one factor when several are involved can worsen the estimates. A detailed specification is used for the hedonic modelling since omitted variables can give the appearance of heteroscedasticity. The paper uses data from over 1400 sales in Stoke-on-Trent in 1994 and finds heteroscedasticity related to both age and the external area of the property. It is shown that this was not due to outliers in the data. Use of estimated generalized least squares is shown to remove the heteroscedasticity. The estimates provided by this technique are shown to give forecast errors that may have a smaller standard deviation than ordinary least squares estimates.

Suggested Citation

  • M. Fletcher & P. Gallimore & J. Mangan, 2000. "Heteroscedasticity in hedonic house price models," Journal of Property Research, Taylor & Francis Journals, vol. 17(2), pages 93-108, January.
  • Handle: RePEc:taf:jpropr:v:17:y:2000:i:2:p:93-108
    DOI: 10.1080/095999100367930
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    References listed on IDEAS

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    1. Adrian C. Darnell, 1994. "A Dictionary Of Econometrics," Books, Edward Elgar Publishing, number 118, April.
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    1. repec:exl:25engi:v:28:y:2017:i:2:p:135-144 is not listed on IDEAS
    2. Alexandre Tangerini & Nils Soguel, 2005. "Evaluation monétaire de la qualité du paysage. Monetary valuation of the landscape quality," Urban/Regional 0507002, EconWPA.
    3. repec:spr:alstar:v:102:y:2018:i:1:d:10.1007_s10182-017-0293-4 is not listed on IDEAS
    4. Esmeralda A. Ramalho & Joaquim J.S. Ramalho, 2014. "Convenient links for the estimation of hedonic price indexes: the case of unique, infrequently traded assets," Statistica Neerlandica, Netherlands Society for Statistics and Operations Research, vol. 68(2), pages 91-117, May.
    5. Alexandre Tangerini & Nils Soguel, 2005. "Evaluation monétaire de la qualité de paysage / Evaluation of the landscape quality," Urban/Regional 0507007, EconWPA.
    6. Cho, Seong-Hoon & Chen, Zhuo & Yen, Steven T. & Eastwood, David B., 2006. "Estimating Effects of an Urban Growth Boundary on Land Development," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 38(02), pages 287-298, August.
    7. Simlai, Prodosh, 2014. "Estimation of variance of housing prices using spatial conditional heteroskedasticity (SARCH) model with an application to Boston housing price data," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(1), pages 17-30.
    8. Davidovska Stojanova, Biljana & Jovanovic, Branimir & Kadievska Vojnovic, Maja & Ramadani, Gani & Petrovska, Magdalena, 2008. "Real Estate Prices in the Republic of Macedonia," MPRA Paper 43166, University Library of Munich, Germany.
    9. Cho, Seong-Hoon & Chen, Zhuo & Yen, Steven T., 2008. "Urban Growth Boundary and Housing Prices: The Case of Knox County, Tennessee," The Review of Regional Studies, Southern Regional Science Association, vol. 38(1), pages 29-44.
    10. repec:kap:jgeosy:v:20:y:2018:i:1:d:10.1007_s10109-017-0257-y is not listed on IDEAS
    11. Stevenson, Simon, 2004. "New empirical evidence on heteroscedasticity in hedonic housing models," Journal of Housing Economics, Elsevier, vol. 13(2), pages 136-153, June.
    12. Cho, Seong-Hoon & Bowker, James Michael & Park, William M., 2006. "Measuring the Contribution of Water and Green Space Amenities to Housing Values: An Application and Comparison of Spatially Weighted Hedonic Models," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(03), December.
    13. Çağlayan Ebru & Arikan Eban, 2011. "Determinants of house prices in Istanbul: a quantile regression approach," Quality & Quantity: International Journal of Methodology, Springer, vol. 45(2), pages 305-317, February.
    14. Henrik Andersson & Emmanuelle Lavaine, 2018. "Nitrates and property values: evidence from a french market intervention," CEE-M Working Papers 18-06, CEE-M, Universitiy of Montpellier, CNRS, INRA, Montpellier SupAgro.

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