The Journal of Real Estate Finance and Economics
Volume 14, Issue 1, Article 7 (Abstract)
Title:	Price Dispersion, The Distributions of First and Second Sales, and Bias in the Repeat Sales Price Index
Author:	Marion Steele and Richard Goy
Abstract:	This paper analyses the effects on repeat sale (RS) price indexes of the relatively short holding period of RS investments. We focus on very short holds; our data cover three years. We find that the first of a repeat pair occurs at a statistically significant discount to the market price, and RS price changes are upward biased estimates of market price changes. For a constant bias in the price change, the bias in the index varies according to the distributions of first and second sales. the impact of these distributions is indicated by an easily computed vector, R. In our data, index bias is negligible in early quarters but substantial in final ones. Bias in the price change apparently implies that an intercept should be added to the standard RS regression, but we find including an intercept overcorrects. We recommend that RS studies; report R, to indicate the impact on the index of any suspected price change bias; continue to exclude the intercept in repeat sales regressions; use cautiously GLS methods which weight short holds heavily.
Keywords:	repeat sales, repeat sales bias, short holds, repeat sales intercept