| The Journal of Real Estate Finance and Economics | |
| Volume 14, Issue 3, Article 4 (Abstract) | |
| Title: | Using the Spatial Configuration of the Data to Improve Estimation |
| Author: | R. Kelley Pace and Otis W. Gilley |
| Abstract: | Using the well-known Harrison and Rubinfeld (1978) hedonic pricing data, this manuscript demonstrates the substantial benefits obtained by modeling the spatial dependence of the errors. Specifically, the estimated errors on the spatial autogregression fell by 44% relative to OLS. The spatial autoregression corrects predicted values by a nonparametric estimate of the error on nearby observations and thus mimics the behavior of appraisers. The spatial autoregression, by formally incorporating the areal configuration of the data to increase predictive accuracy and estimation efficiency, has great potential in real estate empirical work. |
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