Hedonic Regression

A method used to estimate the value of a good or service by breaking it down into a series of components. The value contribution of each component is then determined through regression analysis, and occasionally through additional general models such as sales adjustment grids. This method is commonly used in real estate appraisal and Consumer Price Index (CPI) calculations. For example a house may be valued according to such components as the number of available rooms, proximity to “valued” services or institutions (such as schools), scenic views and neighborhood demand.

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