Linear regression is a statistical tool used to model the relation between a set of housing characteristics and real estate prices. It estimates the mean value of the response variable, given levels of the predictor variables. The quantile regression approach complements the least squares by identifying how differently real estate prices respond to a change in one unit of housing characteristic at different quantiles, rather than estimating the constant regression coefficient representing the change in the response variable produced by a one-unit change in the predictor variable associated with that coefficient. It estimates the implicit price for each characteristic across the distribution of prices and allows buyers of higher-priced properties to behave differently from buyers of lower-priced properties, even if they are within one single housing estate. Thus, it provides a better explanation of the real-world phenomenon and offers a more comprehensive picture of the relationship between housing characteristics and prices.
Get full access to this article
View all access options for this article.
References
1.
Arias, O., Hallock, K. and Sosa-Escudero, W. ( 2001) Individual heterogeneity in the returns to schooling: instrumental variables quantile regression using twins data, Empirical Economics, 26(1), pp. 7-40.
2.
Bailey, M.J., Muth, R.F. and Nourse, H.O. ( 1963) A regression model for real estate price index construction , Journal of the American Statistical Association , 58, pp. 933-942.
3.
Buchinsky, M. ( 1982) Methodological issues in quantile regression (mimeograph) .
4.
Buchinsky, M. ( 1994) Changes in U.S. wage structure 1963-1987: an application of quantile regression, Econometrica, 62(2), pp. 405-458.
5.
Buchinsky, M. ( 1997) The dynamics of changes in the female wage distribution in the USA: a quantile regression approach, Journal of Applied Econometrics, 13(1), pp. 1-30.
6.
Can, A. ( 1992) Specification and estimation of hedonic housing price models, Regional Science and Urban Economics, 22, pp. 453-474.
7.
Can, A. and Megbolugbe, I. ( 1997) Spatial dependence and house price index construction , Journal of Real Estate Finance and Economics, 14, pp. 203-222.
8.
Case, B. and Quigley, J.M. ( 1991) The dynamics of real estate prices, Review of Economics and Statistics, 73(3), pp. 50-58.
9.
Census and Statistics Department (2002) Annual Digests of Statistics. Hong KongGovernment Printer .
10.
Chamberlain, G. ( 1994) Quantile regression, censoring and the structure of wages , in: C. A. Sims (Ed.) Advances in Econometrics, pp. 171- 209. New York: Elsevier.
11.
Cheshire, P. and Sheppard, S. ( 1995) On the price of land and the value of amenities , Economica, 62, pp. 247-267.
12.
Deaton, A. ( 1997) The Analysis of Household Surveys. Baltimore, MD: Johns Hopkins University Press.
13.
Efron, B. ( 1982) The jackknife, the bootstrap, and other resampling plans . Monograph No. 38, CBMS-NSF Regional Conference Series in Applied Mathematics, Society for Industrial and Applied Mathematics, Philadelphia, PA.
14.
Epple, D. ( 1987) Hedonic prices and implicit markets: estimating demand and supply functions for differentiated goods, Journal of Political Economy, 95(1), pp. 58-80.
15.
Freeman, A.M. ( 1979) The hedonic approach to measuring for neighborhood characteristics , in: D. Segal (Ed.) The Economics of Neighborhood, pp. 191-218. New York: Academic Press.
16.
Gould, W.W. ( 1992) Quantile regression with bootstrapped standard errors , Stata Technical Bulletin, 9, pp. 19-21.
17.
Gould, W.W. ( 1997) Interquantile and simultaneous-quantile regression , Stata Technical Bulletin, 38, pp. 14-22.
18.
Government of the Hong Kong Special Administration Region ( 2004) Hong Kong Annual Report 2003. Hong Kong: Government Printer.
19.
Gyourko, J. and Tracy, J. ( 1999) A look at real housing prices and incomes: some implications for housing affordability and quality, Federal Reserve Bank of New York Economic Policy Review, September, pp. 63-77.
20.
Hall, P. ( 1992) The Bootstrap and Edgeworth Expansion. New York: Springer-Verlag.
21.
Hao , L. and Naiman, D.Q. (2007) Quantile Regression. Thousand Oaks, CA: Sage Publications.
22.
Heckman, J.J. ( 1979) Sample selection bias as a specification error , Econometrica, 47, pp. 153-161.
23.
Kahn, L.M. ( 1998) Collective bargaining and the interindustry wage structure: international evidence, Economica, 65(260), pp. 507-534.
24.
Kain, J. and Quigley J. ( 1970) Measuring the value of housing quality, Journal of the American Statistical Association, 45, pp. 532-548.
25.
Koenker, R. and Bassett, G. jr ( 1978) Regression quantiles, Econometrica , 46(1), pp. 33-50.
26.
Koenker, R. and Hallock, K. ( 2001) Quantile regression: an introduction, Journal of Economic Perspectives, 15, pp. 143-156.
27.
Machado, J. and Mata, J. ( 2005) Counterfactual decomposition of changes in wage distributions using quantile regression, Journal of Applied Economics, 20(4), pp. 4445-465.
28.
Manning, W., Blumberg, L. and Moulton, L. ( 1995) The demand for alcohol: the differential response to price , Journal of Health Economics, 14(2), pp. 123-128.
29.
McMillen, D.P. and Thornes, P. ( 2006) Housing renovation and the quantile repeated-sales price index, Real Estate Economics, 34(4), pp. 567-584.
30.
Mosteller, F. and Tukey, J.W. ( 1977) Data Analysis and Regression: A Second Course in Statistics . Reading, MA: Addison-Wesley .
31.
Newey, W. and West, K. ( 1987) A simple positive semi-finite, heteroskedasticity and autocorrelation consistent covariance matrix, Econometrica , 55, pp. 703-708.
32.
Newsome, B. and Zietz, J. (1992) Adjusting comparable sales using MRA: the need for segmentation, Appraisal Journal, 6, pp. 129-135.
33.
Oaxaca, R. ( 1973) Male-female wage differentials in urban labor markets , International Economic Review, 14(3), pp. 693-709.
34.
Pollakowski, H.O. ( 1982) Urban Housing Markets and Residential Location . Lexington, MA: DC Heath and Company.
35.
Rating and Valuation Department (1981- 2005) Hong Kong property review. Government of the Hong Kong Special Administrative Region.
36.
Ridker, R. and Henning, J. ( 1967) The determinants of residential property values with special reference to air pollution, Review of Economics and Statistics , 49, pp. 246-257.
37.
Rogers, W.H. ( 1993) Calculation of quantile regression standard errors , Stata Technical Bulletin, 13, pp. 18-19.
38.
Schultz, T.P. and Mwabu, G. ( 1998) Labor unions and the distribution of wages and employment in South Africa, Industrial and Labor Relations Review, 51(4), pp. 680-703.
39.
White, H. ( 1980) A heteroskedasticity-consistent covariance matrix and a direct test for heteroskedasticity, Econometrica, 48(4), pp. 817-838.
40.
Wilkinson, R.K. ( 1973) House prices and the measurement of externalities , Economic Journal, 83(1), pp. 72-86.
41.
Zietz, J., Zietz, E.N. and Sirmans, G.S. ( 2008) Determinant of housing prices: a quantile regression approach , Journal of Real Estate Finance and Economics, 37(4), pp. 317-333.
