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Evaluating Real Estate Valuation Systems
Robert J. Shiller Yale University - Cowles Foundation; National Bureau of Economic Research (NBER); Yale University - International Center for Finance Allan N. Weiss Case Shiller Weiss Inc. Journal of Real Estate Finance And Economics, Vol. 18, No. 2 Abstract: A framework for comparing real estate valuation systems (including comparing purely statistical valuation systems with current appraisal methods) is proposed. The Density Estimation and Profit Simulation (DEPS) Method measures quality of a valuation system by simulating benefits to the mortgage lender who uses this method in mortgage underwriting to limit mortgage portfolio losses due to default. Related simple measures relevant to the selection of a valuation system are also discussed: skewness of the distribution of errors, correlation of valuation errors with current selling price errors, correlation of errors of the valuation system with errors of valuation systems used by competing mortgage lenders, and other measures.
JEL Classifications: R0 Accepted Paper SeriesDate posted: June 05, 1998 ; Last revised: June 05, 1998Suggested CitationContact Information
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