Purpose – The purpose of this paper is to examine the usefulness of a heuristic expert system, to show its applicability to real-world valuation problems, and to suggest several avenues for statistical testing. Design/methodology/approach – The expert systems follow a traditional sales adjustment grid format, with sufficient data for non-parametric testing. Findings – The paper finds that, while non-parametric statistics provide weaker results than traditional (e.g. hedonic regression) modeling, the technique provides a statistically testable model useful in situations with limited data and/or poorly characterized probability functions. Practical implications – This paper addresses the conundrum faced by real estate valuers on the lack of statistical underpinnings of traditional heuristic models. Originality/value – This is one of the first empirical studies in the valuation literature exploring statistical characterization of heuristic valuation methods.
Author: John A. Kilpatrick
Originally published in the Journal of Property Investment & Finance, Vol. 29, No. 4/5 (2011)