Repeat Sales Indexes: Estimation Without Assuming that Errors in Asset Returns are Independently Distributed
Rachel A.J. Pownall
Tilburg University - Department of Finance; Maastricht University - Limburg Institute of Financial Economics (LIFE)
Brandeis University - Department of Economics
Jonathan H. Hamilton
University of Florida - Warrington College of Business Administration - Department of Economics
CEPR Discussion Paper No. DP7344
This paper proposes an alternative specification for the second stage of the Case-Shiller repeat sales method. This specification is based on serial correlation in the deviations from the mean one-period returns on the underlying individual assets, whereas the original Case-Shiller method assumes that the deviations from mean returns by the underlying individual assets are i.i.d. The methodology proposed in this paper is easy to implement and provides more accurate estimates of the standard errors of returns under serial correlation. The repeat sales methodology is generally used to construct an index of prices or returns for unique, infrequently traded assets such as houses, art, and musical instruments which are likely to be prone to exhibit serial correlation in returns. We demonstrate our methodology on a dataset of art prices and on a dataset of real estate prices from the city of Amsterdam.
Number of Pages in PDF File: 40
Keywords: art, index, real estate, repeat sales
JEL Classification: C13, C29, G12working papers series
Date posted: August 26, 2009
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