– The purpose of this paper is to demonstrate the application of robust techniques to the estimation of hedonic house price indexes.
– The authors use simulation analysis to compare an index estimated using ordinary least squares (OLS) with several indexes estimated using robust techniques. The analysis uses sales transactions data from a US city. The authors then explore how robust methods can correct for omitted variables under some circumstances and how they affect the revision problem that occurs when longitudinal hedonic indexes are updated.
– Robust methods can resolve missing variable problems in some circumstances and also can substantially reduce the revision problem in longitudinal hedonic indexes.
– Robust techniques may be preferable to OLS when constructing longitudinal hedonic indexes.
– This is the first paper to undertake a systematic analysis of the applicability of robust techniques in constructing hedonic house price indexes.
