Using Revisions as a Measure of Price Index Quality in Repeat-Sales Models
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11146_2018_9692_ReferencePDF.pdf
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883.48 KB
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Checksum (MD5)
29b21d5d7dd36f64ddb88cade08dd0cb
Author(s)
van de Minne, Alexander
Francke, Marc
Geltner, David M
White, Robert
Date Issued
January 2019
Journal
Journal of Real Estate Finance and Economics
Publisher
Springer US
Citation
van de Minne, Alex et al. "Using Revisions as a Measure of Price Index Quality in Repeat-Sales Models." Journal of Real Estate Finance and Economics 60 (May 2020): 514–553
Version
Author's final manuscript
Abstract
Repeat-sales indexes are the most widely used type of transaction based property price indexes. However, such indexes are particularly prone to revision. When a new period of transaction data becomes available and is used to update the repeat-sales model, all past index values can potentially be revised. These revisions are especially problematical for commercial real estate (as compared to housing), due to the relative scarcity of transaction data and the heterogeneity of the underlying properties. From a methodological perspective, the magnitude of the revisions is a particularly useful measure of the index quality, as it directly reflects both the precision of the index and its practical usefulness in economic and business applications. This paper focuses on index revisions in thin, commercial property markets, the type of market that is most challenging. We present multiple specifications of the repeat-sales model (both existing and new), seeking to reduce revisions. We are able to reduce overall index revisions by more than 50%, compared to more traditional repeat-sales models.
MIT Department
Massachusetts Institute of Technology. Center for Real Estate
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike
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DOI of Published Version
https://doi.org/10.1007/s11146-018-9692-x
