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Repeat Sales Indexes: Estimation Without Assuming that Errors in Asset Returns are Independently Distributed

40 Pages Posted: 26 Aug 2009  

Rachel A.J. Pownall

Tilburg University - Department of Finance; Maastricht University - Department of Finance

Kathryn Graddy

Brandeis University - Department of Economics

Jonathan H. Hamilton

University of Florida - Warrington College of Business Administration - Department of Economics

Date Written: June 2009

Abstract

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.

Keywords: art, index, real estate, repeat sales

JEL Classification: C13, C29, G12

Suggested Citation

Pownall, Rachel A.J. and Graddy, Kathryn and Hamilton, Jonathan H., Repeat Sales Indexes: Estimation Without Assuming that Errors in Asset Returns are Independently Distributed (June 2009). CEPR Discussion Paper No. DP7344. Available at SSRN: https://ssrn.com/abstract=1461973

Rachel Ann Jane Pownall

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Maastricht University - Department of Finance ( email )

Maastricht, 6200 MD
Netherlands

Kathryn Graddy (Contact Author)

Brandeis University - Department of Economics ( email )

415 South Street MS 021
Waltham, MA 02453-2728
United States
781-736-8616 (Phone)
781-736-2269 (Fax)

HOME PAGE: http://people.brandeis.edu/~kgraddy/

Jonathan H. Hamilton

University of Florida - Warrington College of Business Administration - Department of Economics ( email )

Gainesville, FL 32611-7140
United States
352-392-5017 (Phone)
352-392-7860 (Fax)

HOME PAGE: http://people.clas.ufl.edu/hamilton/

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