Dealing with Unobserved Heterogeneity in Hedonic Price Models

  title={Dealing with Unobserved Heterogeneity in Hedonic Price Models},
  author={Marc K. Francke and Alex van de Minne},
  journal={ERN: Analytical Models (Topic)},
This paper deals with unobserved heterogeneity in hedonic price models, arising from missing property and locational characteristics. In specific, commercial real estate is very heterogeneous, and data on detailed property characteristics are often lacking. We show that adding mutually independent property random effects to a hedonic price model results in more precise out-of-sample price predictions, both for commercial multifamily housing in Los Angeles and owner-occupied single family… Expand
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