Combining machine learning and econometrics: Application to commercial real estate prices
通过迭代过程将随机效应模型与机器学习算法结合，预测商业房地产资产价值，在凤凰城2652笔交易样本中实现低于11%的平均预测误差，并生成指数和位置热力图。
Abstract In this article, we combine a random effects model with different machine learning algorithms via an iterative process when predicting commercial real estate asset values. Using both random effects and machine learning allows us to combine the strengths of both approaches. The random effects will be used to estimate a common trend, property type trends, location value, and property random effects for properties that sold more than once. The machine learning algorithm will fit the observed characteristics (features) in a complex nonlinear fashion. The model is applied to a small sample of 2652 transactions in Phoenix (AZ) between 2001 and 2021. We only observe a limited number of property characteristics. The average out‐of‐sample MAPE is below 11%, which is as good or even better compared to the average appraisal error found in literature. The out‐of‐sample MAPE is even 9% for properties that sold more than once in the training set. In addition, our model provides indexes and locational heatmaps. These have their own uses and cannot be obtained with standard machine learning algorithms.