Revisiting the Past and Settling the Score: Index Revision for House Price Derivatives

28 Pages Posted: 20 Nov 2006

See all articles by Eric Clapham

Eric Clapham

Stockholm School of Economics - Department of Finance

Peter Englund

Swedish House of Finance

John M. Quigley

University of California, Berkeley, College of Letters & Science, Department of Economics (Deceased); University of California, Berkeley, Haas School of Business, Real Estate Group (Deceased)

Christian L. Redfearn

University of Southern California - Sol Price School of Public Policy

Abstract

This article examines index revision in measuring the prices for owner-occupied housing. We consider revision in the context of equity insurance and the settlement of futures contracts. The usefulness of aggregate housing price indexes in these contexts requires stability as they are extended. Methods that are subject to substantial revision raise questions about the viability of derivatives markets. We find that the most widely used house price indexes are not equally exposed to volatility in revision. Hedonic indexes appear to be substantially more stable than repeat-sales indexes and are not prone to the systematic downward revision found in the repeat-sales indexes.

Suggested Citation

Clapham, Eric and Englund, Peter and Quigley, John M. and Redfearn, Christian L., Revisiting the Past and Settling the Score: Index Revision for House Price Derivatives. Real Estate Economics, Vol. 34, No. 2, pp. 275-302, Summer 2006. Available at SSRN: https://ssrn.com/abstract=945537 or http://dx.doi.org/10.1111/j.1540-6229.2006.00167.x

Eric Clapham (Contact Author)

Stockholm School of Economics - Department of Finance ( email )

SE-113 83 Stockholm
Sweden

Peter Englund

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

John M. Quigley

University of California, Berkeley, College of Letters & Science, Department of Economics (Deceased) ( email )

Berkeley, CA 94720-3880
United States
510-643-7411 (Phone)
510-643-7357 (Fax)

University of California, Berkeley, Haas School of Business, Real Estate Group (Deceased) ( email )

Berkeley, CA 94720-1900
United States

Christian L. Redfearn

University of Southern California - Sol Price School of Public Policy ( email )

Los Angeles, CA 90089-0626
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
16
Abstract Views
637
PlumX Metrics