CFA Practice Question
Which index must control for differences in the characteristics (e.g., size and location) of the property?
B. A hedonic index.
C. An appraisal's based index.
A. A repeat sales index.
B. A hedonic index.
C. An appraisal's based index.
Correct Answer: B
Differences in characteristics cause values to differ so they should be separated from the differences in value due to changes in market conditions. The hedonic procedure models property prices as a function of various characteristics of the properties, such as size, age, location, and quality.
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