Constructing Commercial Indices: A Semiparametric Adaptive Estimator Approach

Posted: 9 Sep 2005

See all articles by Douglas J. Hodgson

Douglas J. Hodgson

University of Quebec at Montreal (UQAM) - Department of Economics

Barrett A. Slade

Independent

Keith Vorkink

Brigham Young University - J. Willard and Alice S. Marriott School of Management

Abstract

Constant-quality commercial indices generated by ordinary least squares may suffer an efficiency loss due to leptokurtosis caused by outliers in transactions data. When the subsequent nonnormality occurs, substantial improvement in index precision is obtained by estimating the hedonic model using a semiparametric adaptive estimator technique. When this method was applied to 1,846 office transactions that occurred in the Phoenix metropolitan area from January 1997 through June 2004, a substantial standard error reduction of approximately 9% was realized relative to ordinary least squares estimates. The difference in average returns between the semiparametric method and ordinary least squares was about 0.25% in each period, which represents a substantial increase in commercial property index precision.

Keywords: hedonic price indices, commercial office property, semiparametric adaptive estimators

Suggested Citation

Hodgson, Douglas J. and Slade, Barrett A. and Vorkink, Keith, Constructing Commercial Indices: A Semiparametric Adaptive Estimator Approach. Journal of Real Estate Finance and Economics, Vol. 32, No. 2, 2006. Available at SSRN: https://ssrn.com/abstract=796088

Douglas J. Hodgson (Contact Author)

University of Quebec at Montreal (UQAM) - Department of Economics ( email )

P.O. Box 8888, Downtown Station
Montreal, Quebec H3C 3P8
Canada

Barrett A. Slade

Independent

No Address Available

Keith Vorkink

Brigham Young University - J. Willard and Alice S. Marriott School of Management ( email )

Provo, UT 84602
United States

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