Hedonic Predicted House Price Indices Using Time-Varying Hedonic Models with Spatial Autocorrelation
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.
|Date of creation:||2011|
|Date of revision:|
|Contact details of provider:|| Postal: St. Lucia, Qld. 4072|
Phone: +61 7 3365 6570
Fax: +61 7 3365 7299
Web page: http://www.uq.edu.au/economics/
More information through EDIRC
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.:
- 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.
- Göran Therborn & K.C. Ho, 2009. "Introduction," City, Taylor & Francis Journals, vol. 13(1), pages 53-62, March.
- 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.
- J. Barkley Rosser, 2009. "Introduction," Chapters, in: Handbook of Research on Complexity, chapter 1 Edward Elgar Publishing.
- 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, 06.
- 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.
- Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
- de Haan, Jan & Diewert, Erwin & Hendriks, Rens, 2011.
"Hedonic Regressions and the Decomposition of a House Price index into Land and Structure Components,"
Economics working papers
erwin_diewert-2011-8, Vancouver School of Economics, revised 05 Apr 2011.
- 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.
When requesting a correction, please mention this item's handle: RePEc:qld:uq2004:432. 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: (SOE IT)
If references are entirely missing, you can add them using this form.