Market Risk Factor and the Weighted Repeat Sales Method

作者：Cheng Ping^*; He Xin; Lin Zhenguo; Liu Yingchun

来源：Journal of Real Estate Research, 2015, 37(1): 1-22.

In this paper, we identify a critical issue in the weighted repeat sales (WRS) method-the omission of market risk in the weight estimation model specified by Case and Shiller (1989). We demonstrate that the omission of market risk is conceptually unjustified. We propose a modified WRS model that is empirically supported, but also contributes to the broad discussion on the holding period dependence of real estate risk. We also show that the Case-Shiller weighting method is likely to be mis-specified in nine of the ten cities where the Case-Shiller metro indices are "tradable" with housing options and futures contracts listed on the Chicago Mercantile Exchange. Using a large sample of repeat sales from the Washington DC area, the original repeat sales method of Bailey, Muth, and Nourse (1963) and the Case-Shiller method are compared against the modified WRS. The results indicate that market risk plays an important role in the index estimation.

• 出版日期2015-3
• 单位东北财经大学