Commercial Property Price Indexes: Problems of Sparse Data, Spatial Spillovers, and Weighting
IMF Working Papers, May 1, 2014
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- Commercial Property Price Indexes: Problems of Sparse Data, Spatial Spillovers, and Weighting
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Bibliographic details
- Authors: Mick Silver, Brian Graf
- Published: May 1, 2014
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484364543.001
Summary
- Transaction-price residential (house) and commercial property price indexes (RPPIs and CPPIs) have inherent problems of sparse data on heterogeneous properties, more so CPPIs.
- Repeat-sales and hedonic panel data regression frameworks are typically used to control for heterogeneity when estimating overall price change.
- The study addresses the problem of sparse data, demonstrates the need to include spatial price spillovers to remove bias, and proposes an innovative approach to effectively weight regional CPPIs along with improvements to higher-level weighting systems.
- The study uses spatial panel regressions on granular CPPIs for the United States (US).
Methods and Analytical Contributions
- Uses spatial panel regressions on granular US CPPIs to model commercial property prices.
- Demonstrates that failing to include spatial price spillovers introduces bias in CPPI estimation.
- Proposes an innovative regional weighting approach for CPPIs and suggests improvements to aggregation at higher levels.
Key Findings and Themes
- Sparse data on heterogeneous commercial properties complicates CPPI construction more than RPPIs.
- Spatial price spillovers are necessary to remove estimation bias in CPPIs.
- Improved weighting methodologies at regional and higher aggregation levels can enhance CPPI accuracy.
Policy and Practical Implications
- Statistical agencies and index compilers should:
- Incorporate spatial econometric features (spatial price spillovers) into CPPI estimation frameworks.
- Adopt more effective regional weighting schemes for CPPIs.
- Improve higher-level weighting systems used to aggregate regional CPPIs.
Publication and Metadata
- Authors: Mick Silver, Brian Graf
- Publication date: May 1, 2014
- Series: Working Paper No. 2014/072
- Issue: 072
- Volume: 2014
- Pages: 30
- DOI: https://doi.org/10.5089/9781484364543.001
- Stock No: WPIEA2014072
- ISBN: 9781484364543
- ISSN: 1018-5941
- Subject: Econometric analysis, Inflation, Land prices, Logit models, Price indexes, Prices, Spatial models
- Keywords: Commercial Property Price Indexes, dummy variable, Errors in Measurement, House Price Indexes, Index Number Weights, Inflation, inflation estimate, Land prices, Logit models, math, Moody's aggregation process, Moody's CPPIs, Price indexes, price inflation, RCA building block index, RCA CPPI weight, Spatial Econometrics, Spatial models, Spatial Panel Regressions, transaction price, WP
IMF Working Papers — Commercial Property Price Indexes: Problems of Sparse Data, Spatial Spillovers, and Weighting