Estimating Property Values by Replication: An Alternative to the Traditional Grid and Regression Methods

20 Pages Posted: 11 Dec 2008

See all articles by Tsong-Yue Lai

Tsong-Yue Lai

California State University-Fullerton, Department of Finance

Kerry D. Vandell

University of California, Irvine - Paul Merage School of Business; University of California, Irvine School of Law

Ko Wang

City University of New York (CUNY) - Baruch College - Zicklin School of Business

Gerd Welke

Baruch College - Zicklin School Business - Real Estate Department

Date Written: December 8, 2008

Abstract

This paper proposes and develops a replication method for estimating property values, in which optimal weights of comparable property attributes that best duplicate the subject property are determined. In a setting where the number of comparables is large compared to the number of attributes, replication weakly outperforms traditional general least squares regression by making use of potential correlations in the error structure. A similar result obtains in comparison to the grid method, which may suffer from subjective price adjustment factors. The replication method suggests using a large sample regression analysis to obtain the functional form of the error variance-covariance, and then replicating the subject with a smaller, attribute-close set of comparable properties.

Keywords: property value, attributes

Suggested Citation

Lai, Tsong-Yue and Vandell, Kerry D. and Wang, Ko and Welke, Gerd, Estimating Property Values by Replication: An Alternative to the Traditional Grid and Regression Methods (December 8, 2008). Journal of Real Estate Research, Vol. 30, No. 4, 2008, Available at SSRN: https://ssrn.com/abstract=1313268

Tsong-Yue Lai (Contact Author)

California State University-Fullerton, Department of Finance ( email )

PO Box 6848
Fullerton, CA 92834-6848
United States
657-278-3855 (Phone)
657-278-2161 (Fax)

Kerry D. Vandell

University of California, Irvine - Paul Merage School of Business ( email )

Paul Merage School of Business
Irvine, CA California 92697-3125
United States

University of California, Irvine School of Law ( email )

401 E. Peltason Dr.
Ste. 1000
Irvine, CA 92697-1000
United States

Ko Wang

City University of New York (CUNY) - Baruch College - Zicklin School of Business ( email )

55 Lexington Ave., Box B13-260
New York, NY 10010
United States

Gerd Welke

Baruch College - Zicklin School Business - Real Estate Department ( email )

United States

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