A REAL-ESTATE PRICE-INDEX FOR THIN MARKETS

This article examines a time-series-based method for estimating real e state price indexes for markets that have few transactions. The propos ed method is more parsimonious than the conventional repeat sale or he donic methods. Also, it is potentially more accurate and less prone to outliers. It achieves this by linking current transactions to precedi ng transactions, thereby increasing the set of comparable transactions on which to base the index. My experiments confirm that the time-seri es price index fares much better in thin markets than a benchmark hedo nic index. It remains close to the true index when there are few trans actions and it does not have the volatility of the benchmark index. Wh ile the time-series-based index developed in this article does better than the benchmark hedonic index, one surprise result is that the hedo nic index is itself quite robust in small samples.