PRICE INDEXES BASED ON THE HEDONIC REPEAT-SALES METHOD - APPLICATION TO THE HOUSING-MARKET

Shiller (1993) proposes the hedonic repeated-measures (HRM) approach t o measuring constant quality price indices for heterogeneous assets su ch as some bonds and real estate. We derive a mathematical relationshi p between the coefficients of the HRM model and those from the standar d repeat-sales model, and we demonstrate how hedonic characteristics s hould be chosen for inclusion in the HRM model. Empirical estimates us ing Fairfax, Virginia, housing transactions data show that the HRM pri ce index evaluated at the mean of the hedonic variable is virtually id entical to the standard repeat sales index, just as predicted by our m athematical relationship, But the HRM allows estimation of different p rice paths for heterogeneous assets. We demonstrate that use of assess ed value as the only hedonic characteristic allows parsimonious HRM es timates.