Keywords

hedonic price indices, commercial office property, semiparametric adaptive estimators

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.

Original Publication Citation

Hodgson, D., B. Slade, and K. Vorkink, 2006, Constructing Commercial Indices: A Semiparametric Adaptive Estimator Approach, Journal of Real Estate Finance and Economics, 32:2, pp. 151 – 168.

Document Type

Peer-Reviewed Article

Publication Date

2006

Publisher

Journal of Real Estate Finance and Economics

Language

English

College

Marriott School of Business

Department

Finance

University Standing at Time of Publication

Full Professor

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