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Journal articles (2011), Journal of Property Investment and Finance, 29 (1), pp. 35-48

A repeat sales index robust to small datasets

BARONI Michel , BARTHELEMY Fabrice, Mokrane Mahdi

As suggested by D. Geltner, commercial properties indices have to be built using repeat sales instead of hedonic indices. The repeat sales method is a means of constructing real estate price indices based on a repeated observation of property transactions. These indices may be used as benchmarks for real estate portfolio managers. But the investors in general are also interested in introducing real estate performance in their portfolio to enhance the efficient frontier. Thus, expected return and volatility are the two key parameters. To create and to improve contracts on real estate indices, trend and volatility of these indices must be robust regarding the periodicity of the index and the volume of transactions. This paper aims to test the robustness of the trend and volatility estimations for two indices: the classical Weighted Repeat Sales (Case & Shiller 1987) and a PCA factorial index (Baroni, Barthélémy and Mokrane 2007). The estimations are computed from a dataset of Paris commercial properties. Our main findings are that the trend and volatility estimates are biased for the WRS index and not for the PCA factorial index when the periodicity increases. Consequently, the level of the index at the end of the computing period is significantly different for various periodicities in the case of the WRS index. Globally, the PCA factorial seems to be more robust to the number of transactions. Link to the article

BARONI, M., BARTHELEMY, F. and MOKRANE, M. (2011). A repeat sales index robust to small datasets. Journal of Property Investment and Finance, 29(1), pp. 35-48.

Keywords : #Estimations-d'indices-immobilier, #Indices-de-ventes-répétées, #Volume-de-transactions