The Choice of Methodology for Computing Housing Price Indexes: Comparisons of Temporal Aggregation and Sample Definition

Posted: 11 Dec 1998

See all articles by Peter Englund

Peter Englund

Swedish House of Finance

John M. Quigley

University of California, Berkeley, College of Letters & Science, Department of Economics (Deceased); University of California, Berkeley, Haas School of Business, Real Estate Group (Deceased)

Christian L. Redfearn

University of Southern California - Sol Price School of Public Policy

Abstract

Housing transactions are executed and recorded daily but are routinely pooled into longer time periods for the measurement and analysis of housing price trends. We utilize an unusually rich data set, covering essentially all arm's length housing sales in Sweden for a dozen years, in an attempt to understand the effect of temporal aggregation upon estimates of housing prices and their volatilities. This rich data set also provides a unique opportunity to compare the results using the conventional weighted repeat sales model (WRS) to those based on a research strategy which incorporates all available information on house sales. The results indicate the clear importance of temporal disaggregation in the estimation of housing prices and volatilities--regardless of the model employed. The appropriately disaggregated mode is then used as benchmark to compare estimates of the course of housing prices produced by the two models during the twelve year period 1981-1993. These results indicate that much of the difference between estimates of price movements can be attributed to the data limitations which are inherent in the repeat sales approach. The results, thus, suggest caution in the interpretation of government-produced price indices or those produced by private firms based on the repeated sales model.

JEL Classification: R0

Suggested Citation

Englund, Peter and Quigley, John M. and Redfearn, Christian L., The Choice of Methodology for Computing Housing Price Indexes: Comparisons of Temporal Aggregation and Sample Definition. Journal of Real Estate Finance and Economics, Vol. 19, Issue 2. Available at SSRN: https://ssrn.com/abstract=128314

Peter Englund

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

John M. Quigley (Contact Author)

University of California, Berkeley, College of Letters & Science, Department of Economics (Deceased) ( email )

Berkeley, CA 94720-3880
United States
510-643-7411 (Phone)
510-643-7357 (Fax)

University of California, Berkeley, Haas School of Business, Real Estate Group (Deceased) ( email )

Berkeley, CA 94720-1900
United States

Christian L. Redfearn

University of Southern California - Sol Price School of Public Policy ( email )

Los Angeles, CA 90089-0626
United States

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