A Varying Parameters Approach to Constructing House Price Indexes

REAL ESTATE ECONOMICS, Summer 1995

Posted: 5 May 1998

See all articles by John R. Knight

John R. Knight

University of the Pacific - Eberhardt School of Business

Jonathan Dombrow

Independent

C. F. Sirmans

Florida State University - Department of Risk Management, Insurance, Real Estate & Business Law

Abstract

Conventional housing price index models assume interperiod parameter stability and typically employ either repeat sales or hedonic methodologies. This paper introduces a method of index construction that combines multiple sales observations with single sale transactions while permitting characteristics prices from hedonic regressions to vary over time. A test for interperiod parameter stability is provided. Each period's data are arranged by location and repeat sales are matched by rows. This construction allows greater use of sample information and acknowledges the unique contribution of repeat sales to the estimation process. It also produces intertemporal error correlations that can be beneficially exploited by the seemingly unrelated regressions (SUR) technique. The paper also demonstrates a significance test for error correlation and discusses the treatment of unequal numbers of observations among index periods.

JEL Classification: R31

Suggested Citation

Knight, John Ross and Dombrow, Jonathan and Sirmans, C. F., A Varying Parameters Approach to Constructing House Price Indexes. REAL ESTATE ECONOMICS, Summer 1995, Available at SSRN: https://ssrn.com/abstract=6250

John Ross Knight (Contact Author)

University of the Pacific - Eberhardt School of Business ( email )

3601 Pacific Avenue
Stockton, CA 95219
United States
209-946-2637 (Phone)
209-946-2586 (Fax)

Jonathan Dombrow

Independent ( email )

C. F. Sirmans

Florida State University - Department of Risk Management, Insurance, Real Estate & Business Law ( email )

Tallahasse, FL 32306
United States
850 644-4076 (Phone)

HOME PAGE: http://www.cob.fsu.edu/rmi

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