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Finance and Economics Discussion Series
Finance and Economics Discussion Series logo links to FEDS home page The Stability of Dummy Variable Price Measures Obtained from Hedonic Regressions
Ana Aizcorbe

Abstract: Although the stability of coefficients from hedonic regressions has received much attention recently, that of dummy variable (DV) price indexes obtained from these regressions has not. In principle, one problem translates into the other only when some prices are not observed in the data. Numerically, however, DV measures obtained from a "typical" specification can be quite unstable even when the number of missing prices is small. To the extent that collinearity is an important source of the problem, functional forms that use (orthogonal) fixed effects to control for quality differences across goods should yield more stable estimates. Data for Intel's microprocessors are used to illustrate these points.

Keywords: Hedonic, price index

Full paper (687 KB PDF)

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Last update: February 21, 2003