Hypothesis testing in hedonic price estimation - On the selection of independent variables

Abstract

Various approaches to hypothesis testing have been used in the past for the purpose of estimating hedonic price equations. The criteria for testing and rejecting explanatory variables have however rarely been made explicit. This paper argues that the results of earlier studies should be used according to structured and not overly arbitrary criteria for selecting which variables to test as well as for their subsequent acceptance or rejection. An explanatory analysis of Singapore's condominium market is used as an empirical illustration of the decision rule for variable selection proposed in the methodological part of the paper.

Housing Attribute Preferences in a Northern Mexico Metropolitan Economy

“…The coefficient for the number of bedrooms is sensitive to the inclusion of additional variables, but also appears to add value to residential structures in this market. As in some earlier empirical analyses, parking spaces, guard posts, and proximity to commercial centers also tend to raise housing prices in this metropolitan market (Gin and Sonstelie 1992;Kockelman 1997;Andersson 2000).…”

Variable selection for hedonic model using machine learning approaches: A case study in Onondaga County, NY

“…Most hedonic studies have selected variables from the results and theoretical and intuitive information of previous empirical studies as well as classical statistical methods (Anderson, 2000). Because the objective of the hedonic analysis is to determine the effect of one attribute on property values, other things being equal, the hedonic price function should include all structural, neighborhood, or environmental characteristics that enter the utility function of a household (Freeman, 2003;Tyrväinen & Miettinen, 2000).…”

“…As hedonic theory does not provide any arguments in favor of a specific set of independent environmental, site specific structural or neighborhood variables nor a specific hedonic price functional form (Anderson, 2000;Freeman, 2003), this lack of theoretical guidance makes the empirical selection of variables less straightforward.…”

Hotel attributes and hedonic prices: an analysis of internet-based transactions in Singapore’s market for hotel rooms

“…The feedback variables also provide more fine-grained information, since the customer's choice amounts to a five-step Likert scale. 4 Accessibility to the city centre 5 (Raffles Place) is included due to the interaction between different property markets in the determination of land values (Andersson 2000). Customers' perceptions of location advantages may reflect both general accessibility and neighbourhood convenience.…”