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Non-temporal Components of Residential Real Estate Appreciation


  • Goetzmann, William N
  • Spiegel, Matthew


This paper separates the components of capital appreciation returns in an asset market into fixed and stochastic portions. It proposes a control for the problem of fixed components in the capital appreciation return used in transactions-based return estimates. We find a consistent bias in the index resulting from repeat sales regressions which may be eliminated through simple methods. The sign and magnitude of the bias, as well as its systematic variation across property, suggest that it is caused by incremental home improvements, as well as by price risk. We propose a maximum likelihood method for estimating the first and second moments of the fixed and temporal components of real estate returns that relies upon relatively small samples. Copyright 1995 by MIT Press.

Suggested Citation

  • Goetzmann, William N & Spiegel, Matthew, 1995. "Non-temporal Components of Residential Real Estate Appreciation," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 199-206, February.
  • Handle: RePEc:tpr:restat:v:77:y:1995:i:1:p:199-206

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    References listed on IDEAS

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    2. Bishop, John Hillman, 1989. "Is the Test Score Decline Responsible for the Productivity Growth Decline?," American Economic Review, American Economic Association, vol. 79(1), pages 178-197, March.
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    5. Thomas J. Kane & Cecilia Rouse, 1993. "Labor Market Returns to Two- And Four-Year College: Is A Credit a Credit And Do Degrees Matter?," Working Papers 690, Princeton University, Department of Economics, Industrial Relations Section..
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    7. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-1381, September.
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    Cited by:

    1. Baroni Michel & Barthélémy Fabrice & Mokrane Madhi, 2009. "A repeat sales index robust to small datasets," THEMA Working Papers 2009-16, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    2. Bernard Thion & Tatiana Bouzdine Chameeva, 2001. "Comparative Analysis of Several Models of Price Indices in Real Estate Transactions," ERES eres2001_285, European Real Estate Society (ERES).
    3. Jed Cohen & Christine E. Blinn & Kevin J. Boyle & Thomas P. Holmes & Klaus Moeltner, 2016. "Hedonic Valuation with Translating Amenities: Mountain Pine Beetles and Host Trees in the Colorado Front Range," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 63(3), pages 613-642, March.
    4. William Goetzmann & Matthew Spiegel, 2000. "The Policy Implications of Portfolio Choice in Underserved Mortgage Markets," Yale School of Management Working Papers ysm161, Yale School of Management, revised 01 Mar 2001.
    5. Stephen Billings & Thomas Thibodeau, 2011. "Intrametropolitan Decentralization: Is Government Structure Capitalized in Residential Property Values?," The Journal of Real Estate Finance and Economics, Springer, vol. 42(4), pages 416-450, May.
    6. Dröes, Martijn I. & Hassink, Wolter H.J., 2013. "House price risk and the hedging benefits of home ownership," Journal of Housing Economics, Elsevier, vol. 22(2), pages 92-99.
    7. Wang, Ferdinand T. & Zorn, Peter M., 1997. "Estimating House Price Growth with Repeat Sales Data: What's the Aim of the Game?," Journal of Housing Economics, Elsevier, vol. 6(2), pages 93-118, June.
    8. Goetzmann, William N. & Ibbotson, Roger G. & Peng, Liang, 2001. "A new historical database for the NYSE 1815 to 1925: Performance and predictability," Journal of Financial Markets, Elsevier, vol. 4(1), pages 1-32, January.
    9. Ghysels, Eric & Plazzi, Alberto & Valkanov, Rossen & Torous, Walter, 2013. "Forecasting Real Estate Prices," Handbook of Economic Forecasting, Elsevier.
    10. James Bugden, 2013. "Renovations and the Repeat-Sales House Price Index," Working Papers 2013.08, School of Economics, La Trobe University.
    11. James Hansen, 2006. "Australian House Prices: A Comparison of Hedonic and Repeat-sales Measures," RBA Research Discussion Papers rdp2006-03, Reserve Bank of Australia.
    12. Billings, Stephen B., 2011. "Estimating the value of a new transit option," Regional Science and Urban Economics, Elsevier, vol. 41(6), pages 525-536.
    13. Philippe Bracke, 2013. "House Prices and Rents: Micro Evidence from a Matched Dataset in Central London_x0003_," ERSA conference papers ersa13p112, European Regional Science Association.
    14. Joseph Gyourko & Joseph Tracy, 2006. "Using Home Maintenance and Repairs to Smooth Variable Earnings," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 736-747, November.
    15. Abel Cadenillas & Robert Elliott & Hong Miao & Zhenyu Wu, 2009. "Risk-Hedging in Real Estate Markets," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 16(4), pages 265-285, December.
    16. repec:pal:jorsoc:v:60:y:2009:i:3:d:10.1057_palgrave.jors.2602567 is not listed on IDEAS
    17. Marilena Locatelli Biey & Roberto Zanola, 1999. "Investment in Paintings: A Short-Run Price Index," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 23(3), pages 209-219, August.
    18. Michel Baroni & Fabrice Barthe´le´my & Mahdi Mokrane, 2007. "APCA Factor Repeat Sales Index for Apartment Prices in Paris," Journal of Real Estate Research, American Real Estate Society, vol. 29(2), pages 137-158.
    19. James Bugden, 2014. "Quality-Adjusted Repeat-Sale House Price Indices," Working Papers 2014.01, School of Economics, La Trobe University.
    20. Dubé, Jean & Thériault, Marius & Des Rosiers, François, 2013. "Commuter rail accessibility and house values: The case of the Montreal South Shore, Canada, 1992–2009," Transportation Research Part A: Policy and Practice, Elsevier, vol. 54(C), pages 49-66.
    21. Harding, John P. & Rosenthal, Stuart S. & Sirmans, C.F., 2007. "Depreciation of housing capital, maintenance, and house price inflation: Estimates from a repeat sales model," Journal of Urban Economics, Elsevier, vol. 61(2), pages 193-217, March.
    22. Dorsey, Robert E. & Hu, Haixin & Mayer, Walter J. & Wang, Hui-chen, 2010. "Hedonic versus repeat-sales housing price indexes for measuring the recent boom-bust cycle," Journal of Housing Economics, Elsevier, vol. 19(2), pages 75-93, June.
    23. Marvin L. Wolverton & Jimmy Senteza, 2000. "Hedonic Estimates of Regional Constant Quality House Prices," Journal of Real Estate Research, American Real Estate Society, vol. 19(3), pages 235-253.

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