Using Hierarchical Clustering Algorithms for Turkish Residential Market

International Journal of Economics and Finance, Vol. 4, No. 1, pp.138-150, January 2012

13 Pages Posted: 6 Feb 2012

See all articles by Ali Hepsen

Ali Hepsen

Istanbul University - Faculty of Business Administration, Department of Finance

Metin Vatansever

Yildiz Technical University

Date Written: October 20, 2011

Abstract

Clustering has a potentially important contribution to real estate portfolio analysis. In this study several hierarchical clustering algorithms are applied to rental returns for seventy-one metropolitan residential markets in Turkey. The aim is to develop homogeneous groupings for real estate portfolios. The historical clustering algorithms documented in this study provides a useful guideline for real estate investors to select appropriate market areas and formulate efficiently diversified investment portfolios. The empirical findings support the three-cluster partition of the districts that reveals a clear rental return distinction of residential markets in Turkey. Cluster 1 is composed of twenty nine districts, which have the lowest rental return levels over the period of 2007:M6 to 2011:M6. Thirty four districts are grouped in Cluster 2. The cities in this group have relatively higher rental returns. The rest eight cities belong to Cluster 3. Rental return levels are distinctively higher than the other two groups. On the other hand, high rental returns are associated with higher levels of risk (standard deviation), and vice versa.

Keywords: Clustering algorithm, Time series Data mining, Residential market, Rental returns

JEL Classification: E30, E44, L74, R10, R20, R30

Suggested Citation

Hepsen, Ali and Vatansever, Metin, Using Hierarchical Clustering Algorithms for Turkish Residential Market (October 20, 2011). International Journal of Economics and Finance, Vol. 4, No. 1, pp.138-150, January 2012, Available at SSRN: https://ssrn.com/abstract=1999402

Ali Hepsen (Contact Author)

Istanbul University - Faculty of Business Administration, Department of Finance ( email )

Istanbul
Turkey

Metin Vatansever

Yildiz Technical University ( email )

Davutpasa Mh., Esenler
Besiktas, Istanbul 80750
Turkey

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
129
Abstract Views
920
rank
256,933
PlumX Metrics