Nonparametric neural network modeling of hedonic prices in the housing market

Abstract

This article addresses the contribution to hedonic modeling of a nonparametric approach based on artificial neural network (ANN) regressions. ANNs provide consistent estimates for the hedonic price of each attribute and permit a number of hypotheses on the hedonic price relationship to be tested nonparametrically. In particular, we exploit results by Stinchcombe and White (Econom Theory 14:295-324, 1998) in order to carry out misspecification testing in linear and semiloglinear hedonic models. The same approach directly applies to testing misspecification of any parametric specification for the hedonic relationship. A nonparametric significance test for the variables in the hedonic model is also proposed. The test extends the approach developed by Racine (J Bus Econ Stat 15(3):369-378, 1997) in kernel-based nonparametric testing to ANN-based inference. The finite sample performance of the proposed tests is analyzed through Monte Carlo experiments, and simulation-based algorithms for computation of the null distribution of the tests are proposed. Then, the performance of three classes of regression models-linear, semi-log, and ANNs-applied to Electronic supplementary material The online version of this article (123 988 M. Landajo et al.hedonic price modeling in a Spanish regional housing market is compared. Our results indicate the presence of nonlinear behavior, as predicted by economic theory, with the ANN-based tests detecting statistically significant evidence of misspecification-both in the linear and the semilog specifications-and ANN regressions providing moderate improvement of predictive performance.

Artificial Intelligence (AI) techniques to analyze the determinants attributes in housing prices

“…Los primeros estudios sobre valoración de inmuebles que utilizan la IA a nivel internacional datan de principios de los años 90 (Borst, 1991 [38] [42]). Sin embargo, no existen precedentes para la capital andaluza -Sevilla-, siendo éste uno de los motivos para la consideración de este enclave en el apartado empírico de esta tesis.…”

Real Estate valuation and forecasting in non-homogeneous markets: A case study in Greece during the financial crisis

“…The sample consists of 36, 527 properties that have been professionally evaluated in the period 2012 -2016. In the majority of the studies regarding real estate value forecasting, very small datasets are used for testing the various methodologies (Landajo et al, 2012;Kilpatrick, 2011;Kusan et al, 2010;Selim, 2009;Kontrimas and Verikas, 2011;Narula et al, 2012;Brasington and Hite, 2008). An exception are the studies from Zurada et al (2011);Peterson and Flanagan (2009).…”

“…Furthermore, the analysis is usually based on small samples (less than 500 properties) at regional level, (Landajo et al, 2012;Kilpatrick, 2011;Kusan et al, 2010;Selim, 2009;Kontrimas and Verikas, 2011;Narula et al, 2012;Brasington and Hite, 2008). In this study the proposed AVMs are tested in a new market still at its infancy with lots of unique characteristics.…”

“…In particular, in Greece, property owners are required to pay taxes that exceed 2.5% of GDP, when in Germany the figure is no more than 0.5% while citizens of neighbouring countries, such as Italy, Cyprus, Bulgaria and Turkey enjoy less property taxes. Atkinson and Crocker, 1987;Aznar and Guijarro, 2007;Aragonés-Beltrán et al, 2008;Ball and Srinivasan, 1994;Bitter et al, 2007;Brown and Uyar, 2004;Chica-Olmo, 2009;Helbich et al, 2014;Kaklauskas et al, 2007;Kilpatrick, 2011;Kontrimas and Verikas, 2011;Kusan et al, 2010;Landajo et al, 2012;Lins et al, 2005;McCluskey et al, 2013;Narula et al, 2012;Park and Bae, 2015;Peterson and Flanagan, 2009;Selim, 2009;Worzala et al, 1995;Zurada et al, 2011).…”

Rural Tourism Accommodation Prices by Land Use-Based Hedonic Approach: First Results from the Case Study of the Self-Catering Cottages in Asturias

“…The Rosen model does not offer any criterion for selecting the functional form of the hedonic equation so that it has to be determined empirically. Several functional forms have been tested in the empirical works, including the linear, log-log, semi-log (log-linear), inverse semi-log, quadratic forms, the Box-Cox transformation, and non-parametric approaches [59,60]. The semi-logarithmic function has been the most predominantly used in applications of the hedonic method for the tourism market [25,27,28,51,[56][57][58].…”