A hedonic price index is generally defined as the ratio of the price of goods in the t-th period to the price in the base period, where these prices are estimated with conditions of structural change by using each period’s hedonic price model. This paper, however, demonstrates than in the case of the Tokyo metropolitan secondhand housing market, the coefficients of each period’s hedonic price model have moved up and down excessively over the whole estimation period for some reason other than structural changes. Therefore, the model would no longer be effective for the estimation of a hedonic price index. Instead, this paper attempts to develop an Overlapping Period Hedonic Model to remedy the defects of the hedonic price model as described above. Based on the assumption that structural change would take place gradually during a specified period, the new model is estimated by using the observations not only in a current period but also for recent periods of a specified length to eliminate the unexpected effects caused by reasons other than structural changes. A new price index, which is called here the OPHM index, is calculated from the new model.
Conjunct method of deriving a hedonic price index in a secondhand housing market with structural change
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