GLAD YOU ASKED The Truth About Heteroskedasticity

Q. Lately I’ve been wondering; Is dwelling age-induced heteroskedasticity prevalent in hedonic price equations? Can you help me? -S. G., University Park

A. Sorry, we’re busy figuring out the tax-dollar-per-inch price of the coming DART light rail line. But you’re in luck. Tom Thibodeau, an SMU real estate professor, recently wrote a paper dealing with that thorny question. We saw it mentioned in an SMU research catalog and, much to the professor’s surprise, called him up chock-full of questions. Is there a vaccine for heteroskedasticity? Would the Dallas police department hire an open heteroskedast?

“1 can’t imagine a popular audience being interested in this,” laughed the good professor, who went on to explain: “Simply, it’s about predicting house prices by looking at all the variables. Heteroskedasticity is the increasing error between predicted prices and actual prices.”

Thibodeau reached his conclusions by studying the data on sales of nearly 8,500 single-family homes in Dallas. So there you have it, S. G. If you’re unable to get your asking price, don’t blame the real estate agent. That ol’ heteroskedasticity will get you every time.

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