29 Pages Posted: 12 Sep 2008
Date Written: September 10, 2008
Age, time and vintage effects are exact collinear, so their effects cannot be disentangled in regression analyses. Suggestions have been put forward to deal with this problem, but in vain. Since the problem of exact collinearity requires external information to solve, any manipulation of the existing data is doomed to fail. This paper circumvents the problem fundamentally by exploiting housing forward contracts, which can estimate vintage effects in housing by using a-priori information in pre-occupation sales (i.e. forward contracts). An empirical illustration of a housing estate in Hong Kong is provided.
Keywords: Vintage, Exact Collinearity, Forward Contracts
JEL Classification: C33, C81, R21
Suggested Citation: Suggested Citation
Yiu, Chung Yim Edward, Disentanglement of Age, Time and Vintage Effects on Housing Price by Forward Contracts (September 10, 2008). Available at SSRN: https://ssrn.com/abstract=1266444 or http://dx.doi.org/10.2139/ssrn.1266444