The Error Structure of Time Series Cross-Section Hedonic Models with Sporadic Event Timing and Serial Correlation

Journal of Applied Econometrics, Vol 14 No 3 (May-Jun 1999), pp. 232-252

21 Pages Posted: 22 Feb 2016

See all articles by Gregory S. Amacher

Gregory S. Amacher

Virginia Polytechnic Institute & State University - Department of Forestry

Daniel Hellerstein

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS), Resource and Rural Economics Division

Date Written: February 19, 1999

Abstract

When estimating hedonic models of housing prices, the use of time series cross-section repeat sales data can provide improvements in estimator efficiency and correct for unobserved characteristics. However, in cases where serial correlation is present, the irregular timing of sales should also be considered. In this paper we develop a model that uses information on the timing of events to account for the sporadic occurrence of events. The model presumes that the serial correlation process can be decomposed into a time-independent (event-wise) component and a time-dependent (time-wise) component. Empirical tests cannot reject the presence of sporadic correlation patterns, while simulations show that the failure to account for sporadic correlation leads to significant losses in efficiency, and that the losses from ignoring sporadic correlation when it exists are larger than losses when sporadic correlation is falsely assumed.

Keywords: hedonic analysis, serial correlation, hosing prices, sporadic events, irregular timing

JEL Classification: C22, C23, R21

Suggested Citation

Amacher, Gregory S. and Hellerstein, Daniel, The Error Structure of Time Series Cross-Section Hedonic Models with Sporadic Event Timing and Serial Correlation (February 19, 1999). Journal of Applied Econometrics, Vol 14 No 3 (May-Jun 1999), pp. 232-252. Available at SSRN: https://ssrn.com/abstract=2735109

Gregory S. Amacher

Virginia Polytechnic Institute & State University - Department of Forestry ( email )

307 Cheatham Hall
Blacksburg, VA 24061
United States

Daniel Hellerstein (Contact Author)

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS), Resource and Rural Economics Division ( email )

355 E Street, SW
Washington, DC 20024-3221
United States
202-694-5613 (Phone)
202-694-5756 (Fax)

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