CFA Level I · CFA Level I Exam · Real Estate and Infrastructure
A hedonic index of residential property prices is most likely constructed by:
A hedonic index is built by regressing sale prices on property characteristics such as size, age and location. This adjusts for differences in quality among properties sold in different periods, so the index reflects pure price change. It differs from repeat-sales and appraisal approaches.
- Atracking repeat sales of the same properties
- Bvaluing a fixed portfolio of properties each period
- Cregressing sale prices on property characteristics such as size and locationCorrect
Explanation
A hedonic index uses regression of transaction prices on attributes to control for quality differences between properties sold in different periods. Repeat sales indexes track the same property, and appraisal indexes revalue a fixed set.
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