Constructing Commercial Indices: A Semiparametric Adaptive Estimator Approach

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...

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Bibliographic Details
Published in:The journal of real estate finance and economics 2006-03, Vol.32 (2), p.151-168
Main Authors: Hodgson, Douglas J, Slade, Barrett A, Vorkink, Keith P
Format: Article
Language:English
Subjects:
Arizona
Bias
Capital assets
Commercial markets
Commercial real estate
Econometrics
Economic methodology
Efficiency
Estimates
Estimation
Indexes
Indicators
Metropolitan areas
Phoenix
Price index
Property
Real estate market
Regression analysis
Studies
U.S.A
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Summary: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. [PUBLICATION ABSTRACT]
ISSN:0895-5638
1573-045X
DOI:10.1007/s11146-006-6012-7