A Mixed Index Approach to Identifying Hedonic Price Models

48 Pages Posted: 5 Sep 2006

See all articles by David M. Brasington

David M. Brasington

University of Cincinnati - Department of Economics

Diane Hite

Auburn University - Department of Agricultural Economics and Rural Sociology

Multiple version iconThere are 2 versions of this paper

Date Written: August 5, 2006

Abstract

Recent literature suggests identifying house price hedonic models by using instrumental variables, spatial statistics, the borders approach, panel data, and other techniques. We introduce a mixed index model to identify house price hedonic 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 that the mixed index model 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 school quality to house price and understates the importance of environmental quality to house price.

Keywords: hedonic house price, mixed index, environmental quality, school quality

JEL Classification: C3, H41, Q25, R21

Suggested Citation

Brasington, David M. and Hite, Diane, A Mixed Index Approach to Identifying Hedonic Price Models (August 5, 2006). Available at SSRN: https://ssrn.com/abstract=928252 or http://dx.doi.org/10.2139/ssrn.928252

David M. Brasington (Contact Author)

University of Cincinnati - Department of Economics ( email )

Carl H. Lindner Hall 2925 Campus Green Drive
PO Box 0371
Cincinnati, OH 45221-0211
United States

Diane Hite

Auburn University - Department of Agricultural Economics and Rural Sociology ( email )

Comer Hall
Auburn, AL 36849
United States
334-844-5655 (Phone)
334-844-5639 (Fax)

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