Hedonic functions , hedonic methods , estimation methods and Dutot and Jevons house price indexes : are there any links ? ∗

Hedonic methods are a prominent approach in the construction of house price indexes. This paper investigates in a comprehensive way whether or not there exists any kind of link between the type of price index to be computed (Dutot or Jevons) and the form of hedonic functions, hedonic methods and estimation methods, with a link being defined as a specific combination of price indexes, functions and methods that simplifies substantially the calculations required to compute hedonic price indexes. It is found that: (i) there is a link between Dutot indexes, exponential hedonic functions and the Poisson pseudo maximum likelihood estimator, on the one hand, and Jevons indexes, log-linear hedonic functions and ordinary least squares, on the other hand; and (ii) unlike implicitly assumed in the hedonic literature, there is no link between Jevons indexes and the time dummy variable method, since in this context quality-adjusted Dutot price indexes may also be simply computed as the exponential transformation of a time dummy variable coefficient, provided that an exponential hedonic function is used. A Monte Carlo simulation study illustrates both the convenience of the links identified and the biases that result from overlooking them or implementing bias corrections based on invalid assumptions.