Local Polynomial Regressions versus OLS for Generating Location Value Estimates

Local Polynomial Regressions versus OLS for Generating Location Value Estimates We estimate location values for single family houses using a standard house price and characteristics dataset and local polynomial regressions (LPR), a procedure that allows for complex interactions between the values of structural characteristics and the value of land. We also compare LPR to additive OLS models in the Denver metropolitan area with out-of-sample methods. We determine that the LPR model is more efficient than OLS at predicting location values in counties with greater densities of sales. Also, LPR outperforms OLS in 2010 for all counties in our dataset. Our findings suggest that LPR is a preferable approach in areas with greater concentrations of sales and in periods of recovery following a financial crisis. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

Local Polynomial Regressions versus OLS for Generating Location Value Estimates

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Publisher
Springer US
Copyright
Copyright © 2016 by Springer Science+Business Media New York
Subject
Economics; Regional/Spatial Science; Financial Services
ISSN
0895-5638
eISSN
1573-045X
D.O.I.
10.1007/s11146-016-9570-3
Publisher site
See Article on Publisher Site

Abstract

We estimate location values for single family houses using a standard house price and characteristics dataset and local polynomial regressions (LPR), a procedure that allows for complex interactions between the values of structural characteristics and the value of land. We also compare LPR to additive OLS models in the Denver metropolitan area with out-of-sample methods. We determine that the LPR model is more efficient than OLS at predicting location values in counties with greater densities of sales. Also, LPR outperforms OLS in 2010 for all counties in our dataset. Our findings suggest that LPR is a preferable approach in areas with greater concentrations of sales and in periods of recovery following a financial crisis.

Journal

The Journal of Real Estate Finance and EconomicsSpringer Journals

Published: Sep 10, 2016

References

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