IDEAS home Printed from https://ideas.repec.org/p/qld/uq2004/432.html
   My bibliography  Save this paper

Hedonic Predicted House Price Indices Using Time-Varying Hedonic Models with Spatial Autocorrelation

Author

Abstract

Hedonic housing price indices are computed from estimated hedonic pricing models. The commonly used time dummy hedonic model and the rolling window hedonic model fail to account for changing consumer preferences over hedonic characteristics and typically these models do not account for the presence of spatial correlation in prices reflecting the role of locational characteristics. This paper develops a class of models with time-varying hedonic coefficients and spatially correlated errors, provides an assessment of the predictive performance of these compared to the commonly used hedonic models, and constructs and compares corresponding price index series. Alternative weighting systems, plutocratic versus democratic, are considered for the class of hedonic imputed price indices. Accounting for seasonality in house sales data, monthly chained indices and annual chained indices based on averages of year-on-year monthly indexes are presented. The empirical results are based on property sales data for Brisbane, Australia over the period 1985 to 2005. On the basis of root mean square prediction error criterion the time-varying parameter with spatial errors is found to be the best performing model and the rolling-window model to be the worst performing model.

Suggested Citation

  • Alicia Rambaldi & Prasada Rao, 2011. "Hedonic Predicted House Price Indices Using Time-Varying Hedonic Models with Spatial Autocorrelation," Discussion Papers Series 432, School of Economics, University of Queensland, Australia.
    • Handle: RePEc:qld:uq2004:432
    as

    Download full text from publisher

    File URL: https://economics.uq.edu.au/files/44867/432.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Robert J. Hill & Daniel Melser, 2008. "Hedonic Imputation And The Price Index Problem: An Application To Housing," Economic Inquiry, Western Economic Association International, vol. 46(4), pages 593-609, October.
    2. W. Erwin Diewert & Jan de Haan & Rens Hendriks, 2015. "Hedonic Regressions and the Decomposition of a House Price Index into Land and Structure Components," Econometric Reviews, Taylor & Francis Journals, vol. 34(1-2), pages 106-126, February.
    3. W. Erwin DIEWERT & Jan de HAAN & Rens HENDRIKS, 2011. "The Decomposition of a House Price Index into Land and Structures Components: A Hedonic Regression Approach," The Valuation Journal, The National Association of Authorized Romanian Valuers, vol. 6(1), pages 58-105.
    4. Durbin, James & Koopman, Siem Jan, 2012. "Time Series Analysis by State Space Methods," OUP Catalogue, Oxford University Press, edition 2, number 9780199641178, Decembrie.
    5. R. Carter Hill & J. R. Knight & C. F. Sirmans, 1997. "Estimating Capital Asset Price Indexes," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 226-233, May.
    6. James Hansen, 2009. "Australian House Prices: A Comparison of Hedonic and Repeat‐Sales Measures," The Economic Record, The Economic Society of Australia, vol. 85(269), pages 132-145, June.
    7. Iqbal Syed & Robert J. Hill & Daniel Melser, 2008. "Flexible Spatial and Temporal Hedonic Price Indexes for Housing in the Presence of Missing Data," Discussion Papers 2008-14, School of Economics, The University of New South Wales.
    8. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mick Silver, 2016. "How to Better Measure Hedonic Residential Property Price Indexes," IMF Working Papers 2016/213, International Monetary Fund.
    2. Robert J. Hill & Alicia N. Rambaldi & Michael Scholz, 2021. "Higher frequency hedonic property price indices: a state-space approach," Empirical Economics, Springer, vol. 61(1), pages 417-441, July.
    3. Martin Bohl & Winfried Michels & Jens Oelgemöller, 2012. "Determinanten von Wohnimmobilienpreisen: Das Beispiel der Stadt Münster," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 32(2), pages 193-208, September.
    4. Gong Yunlong & de Haan Jan, 2018. "Accounting for Spatial Variation of Land Prices in Hedonic Imputation House Price Indices: a Semi-Parametric Approach," Journal of Official Statistics, Sciendo, vol. 34(3), pages 695-720, September.
    5. Ou Bianling & Zhao Xin & Wang Mingxi, 2015. "Power of Moran’s I Test for Spatial Dependence in Panel Data Models with Time Varying Spatial Weights Matrices," Journal of Systems Science and Information, De Gruyter, vol. 3(5), pages 463-471, October.
    6. Alicia N. Rambaldi & Cameron S. Fletcher, 2014. "Hedonic Imputed Property Price Indexes: The Effects of Econometric Modeling Choices," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(S2), pages 423-448, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mick Silver, 2016. "How to Better Measure Hedonic Residential Property Price Indexes," IMF Working Papers 2016/213, International Monetary Fund.
    2. Iqbal A. Syed & Jan De Haan, 2017. "Age, Time, Vintage, And Price Indexes: Measuring The Depreciation Pattern Of Houses," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 580-600, January.
    3. Robert J. Hill & Alicia N. Rambaldi, 2022. "Hedonic Models and House Price Index Numbers," Springer Books, in: Duangkamon Chotikapanich & Alicia N. Rambaldi & Nicholas Rohde (ed.), Advances in Economic Measurement, chapter 0, pages 413-444, Springer.
    4. Robert J. Hill & Alicia N. Rambaldi & Michael Scholz, 2021. "Higher frequency hedonic property price indices: a state-space approach," Empirical Economics, Springer, vol. 61(1), pages 417-441, July.
    5. Erwin Diewert & Chihiro Shimizu, 2020. "Alternative Land‐Price Indexes for Commercial Properties in Tokyo," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 66(4), pages 784-824, December.
    6. W. Erwin Diewert & Kiyohiko G. Nishimura & Chihiro Shimizu & Tsutomu Watanabe, 2020. "The System of National Accounts and Alternative Approaches to the Construction of Commercial Property Price Indexes," Advances in Japanese Business and Economics, in: Property Price Index, chapter 0, pages 181-219, Springer.
    7. W. Erwin Diewert & Chihiro Shimizu, 2022. "Residential Property Price Indexes: Spatial Coordinates Versus Neighborhood Dummy Variables," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 68(3), pages 770-796, September.
    8. Gong Yunlong & de Haan Jan, 2018. "Accounting for Spatial Variation of Land Prices in Hedonic Imputation House Price Indices: a Semi-Parametric Approach," Journal of Official Statistics, Sciendo, vol. 34(3), pages 695-720, September.
    9. Yi Huang & Geoffrey Hewings, 2021. "More Reliable Land Price Index: Is There a Slope Effect?," Land, MDPI, vol. 10(3), pages 1-24, March.
    10. Diewert, W. Erwin & Fox, Kevin J., 2016. "Kevin J. Fox Interview of W. Erwin Diewert," Microeconomics.ca working papers erwin_diewert-2016-6, Vancouver School of Economics, revised 02 Jun 2016.
    11. Diewert, Erwin & Shimizu, Chihiro, 2015. "Residential Property Price Indices For Tokyo," Macroeconomic Dynamics, Cambridge University Press, vol. 19(8), pages 1659-1714, December.
    12. Duffy, David & FitzGerald, John & Timoney, Kevin & Byrne, David, 2013. "Quarterly Economic Commentary, Autumn 2013," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC20133, march.
    13. W. Erwin Diewert & Kevin J. Fox & Chihiro Shimizu, 2016. "Commercial Property Price Indexes And The System Of National Accounts," Journal of Economic Surveys, Wiley Blackwell, vol. 30(5), pages 913-943, December.
    14. Davis, Morris A. & Larson, William D. & Oliner, Stephen D. & Shui, Jessica, 2021. "The price of residential land for counties, ZIP codes, and census tracts in the United States," Journal of Monetary Economics, Elsevier, vol. 118(C), pages 413-431.
    15. W. Erwin Diewert & Kiyohiko G. Nishimura & Chihiro Shimizu & Tsutomu Watanabe, 2020. "Measuring the Services of Durables and Owner Occupied Housing," Advances in Japanese Business and Economics, in: Property Price Index, chapter 0, pages 223-298, Springer.
    16. W. Erwin Diewert & Kevin J. Fox, 2020. "Measuring Real Consumption and CPI Bias under Lockdown Conditions," NBER Working Papers 27144, National Bureau of Economic Research, Inc.
    17. d’Amato, Maurizio & Zrobek, Sabina & Renigier Bilozor, Malgorzata & Walacik, Marek & Mercadante, Giuseppe, 2019. "Valuing the effect of the change of zoning on underdeveloped land using fuzzy real option approach," Land Use Policy, Elsevier, vol. 86(C), pages 365-374.
    18. Rainer Schulz & Hizir Sofyan & Axel Werwatz & Rodrigo Witzel, 2003. "Online Prediction of Berlin Single-Family House Prices," Computational Statistics, Springer, vol. 18(3), pages 449-462, September.
    19. Robert Hill & Radoslaw Trojanek, 2020. "House Price Indexes for Warsaw: An Evaluation of Competing Methods," Graz Economics Papers 2020-08, University of Graz, Department of Economics.
    20. Adam Gorajek, 2018. "Econometric Perspectives on Economic Measurement," RBA Research Discussion Papers rdp2018-08, Reserve Bank of Australia.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:qld:uq2004:432. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SOE IT (email available below). General contact details of provider: https://edirc.repec.org/data/decuqau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.