Hedonic Regression

DEFINITION of 'Hedonic Regression'

A method used to determine the value of a good or service by breaking it down into its component parts. The value of each component is then determined separately through regression analysis. For example, the value of a home can be determined by separating the different aspects of the home - number of bedrooms, number of bathrooms, proximity to schools - and using regression analysis to determine the value of each variable.


One of the more widely-recognized examples of hedonic regression is the Consumer Price Index, which examines changes to the value of a basket of goods over time.

BREAKING DOWN 'Hedonic Regression'

The word "hedonic" refers to pleasure, which economists link to the perceived value each part a good or service has to someone. This sort of regression analysis provides a good - but not perfect - estimate of the value consumers place on a part of a whole.

RELATED TERMS
  1. Regression

    A statistical measure that attempts to determine the strength ...
  2. Stepwise Regression

    The step-by-step iterative construction of a regression model ...
  3. Nonlinear Regression

    A form of regression analysis in which data is fit to a model ...
  4. Sum Of Squares

    A statistical technique used in regression analysis. The sum ...
  5. Hedonic Pricing

    A model identifying price factors according to the premise that ...
  6. Residual Sum Of Squares - RSS

    A statistical technique used to measure the amount of variance ...
Related Articles
  1. Economics

    Understanding Regression

    Regression is a statistical analysis that attempts to predict the effect of one or more variables on another variable.
  2. Professionals

    Regression Analysis

    CFA Level 1 - Regression Analysis
  3. Economics

    What's a Regressive Tax?

    A regressive tax is a levy in a tax system where the tax rate does not change based on the level of income.
  4. Active Trading

    The Linear Regression Of Time and Price

    This investment strategy can help investors be successful by identifying price trends while eliminating human bias.
  5. Investing Basics

    Rising Prices: Inflation or Quality Improvements?

    Price indices are used to measure inflation, but qualitative improvements in products complicates attempts to isolate the true cause of rising prices.
  6. Options & Futures

    Understanding Net Present Value

    Learn how this value is used to determine the worth of a project.
  7. Fundamental Analysis

    Scenario Analysis Provides Glimpse Of Portfolio Potential

    This statistical method estimates how far a stock might fall in a worst-case scenario.
  8. Professionals

    Scenario / What-If Analysis

    We look at some ways that you can evaluate your project.
  9. Fundamental Analysis

    The Market Value Versus Book Value

    Understanding the difference between book value and market value is a simple yet fundamentally critical component to analyze a company for investment.
  10. The Impact of Competitive Factors on Prices and Costs

    As discussed detailed in earlier chapters, the Porter’s five forces affect the long-run profitability of an industry. These forces are the threat of new entrants, bargaining power of buyers, ...
RELATED FAQS
  1. What are some of the more common types of regressions investors can use?

    Learn about the most common types of regressions investors use to model asset prices including linear regressions and multiple ... Read Answer >>
  2. What is the difference between linear regression and multiple regression?

    Learn the difference between linear regression and multiple regression and how multiple regression encompasses not only linear ... Read Answer >>
  3. How can I run linear and multiple regressions in Excel?

    Learn the steps involved in running a regression in Microsoft Excel: preparations, uploading data and using the regression ... Read Answer >>
  4. How can I use a regression to see the correlation between prices and interest rates?

    Learn how to use linear regression to calculate the correlation between stock prices and interest rates by taking the square ... Read Answer >>
  5. In what types of economies are regressive taxes common?

    Understand the three main taxation systems, regressive, proportionate and progressive, and learn where regressive tax systems ... Read Answer >>
  6. How can I run linear regressions in MATLAB?

    Learn how to run linear regressions in MATLAB by loading data, specifying dependent and independent variables and using the ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center