A mixed index approach to identifying hedonic price models

Recent literature suggests identifying house price hedonic regressions by using instrumental variables, spatial statistics, the borders approach, panel data, and other techniques. We present an empirical application of a mixed index model, first proposed by Bowden [Bowden, R.J., 1992. Competitive se...

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Bibliographic Details
Published in:Regional science and urban economics 2008-05, Vol.38 (3), p.271-284
Main Authors: Brasington, David M, Hite, Diane
Format: Article
Language:English
Subjects:
Bootstrap mechanism
Capitalization
Comparative studies
Dienstleistung
Dienstleistungsbereich
Economic models
Environmental quality
Hedonic prices
Hedonismus
House price hedonic
Housing
Housing prices
Identification
Immobilie
Linear models
Ohio
Panel data
Price indexes
Pricing
Qualität
Regression analysis
School quality
Schule
Umweltbelastung
Wert
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Summary:Recent literature suggests identifying house price hedonic regressions by using instrumental variables, spatial statistics, the borders approach, panel data, and other techniques. We present an empirical application of a mixed index model, first proposed by Bowden [Bowden, R.J., 1992. Competitive selection and market data: the mixed-index problem. The Review of Economic Studies 59(3):625–633.] to identify hedonic price regressions. We compare the performance of the mixed index model to a traditional hedonic model and to a hedonic model that includes characteristics of the buyer of each house. We find the mixed index model outperforms the other models based on bootstrap distributions of predicted housing values, prediction variance, and predicted policy effects. The mixed index model distributions are less skewed and kurtotic than the other models, suggesting it more closely satisfies the classical linear regression assumption of normally distributed errors. Compared to the mixed index model, the traditional hedonic overstates the importance of lot size and school quality to house price and understates the importance of environmental quality.
ISSN:0166-0462
1879-2308
DOI:10.1016/j.regsciurbeco.2008.03.002