The use of least median of squares in the estimation of land value equations |
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Authors: | James A Thorson |
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Institution: | (1) Department of Economics and Finance, Southern Connecticut State University, 501 Crescent St., 06515 New Haven, CT |
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Abstract: | Ordinary least squares (OLS) regression is relatively sensitive to the presence of outliers in a data set. In this paper, a robust estimation method, least median of squares (LMS) is used to identify outliers in land value data. Once the outliers are identified, are the land value equations re-estimated. The results show that a few observations can have a significant effect on the estimated coefficients. Finally, the observations which were identified as outliers were examined in more detail. One cause of outliers is an omitted variable. In this case, a large fraction of the outliers were found to be observations with high development potential. |
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Keywords: | outliers least median of squares |
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