Double Perspective Data Envelopment Analysis: One Approach to Estimate the “LOOP” Arbitrage
ABSTRACT
This paper introduces the application of real estate pricing DP DEA - Double Perspective Data - Envelopment Analysis to solve the LOOP (Law of One Price) arbitrage. A general equilibrium model of real estate values was developed to analyze price variation over digital map, and applied to the urban area of the city of Joinville. The power of real estate locational value assessment using DP-DEA is then compared with the usual MRA - Multiple Regression Analysis using a real case of land data. All computational generated results and data were subsequently geocoded on a GIS - Geographic Information System. The computational generated Price line Map is easily visualized in a real estate value chart that can enhance accuracy when compared to a conventional methodology, also a tool for immediate updates and testing the effects of new developments over urban areas.
This paper introduces the application of real estate pricing DP DEA - Double Perspective Data - Envelopment Analysis to solve the LOOP (Law of One Price) arbitrage. A general equilibrium model of real estate values was developed to analyze price variation over digital map, and applied to the urban area of the city of Joinville. The power of real estate locational value assessment using DP-DEA is then compared with the usual MRA - Multiple Regression Analysis using a real case of land data. All computational generated results and data were subsequently geocoded on a GIS - Geographic Information System. The computational generated Price line Map is easily visualized in a real estate value chart that can enhance accuracy when compared to a conventional methodology, also a tool for immediate updates and testing the effects of new developments over urban areas.
Cite this paper
nullL. Novaes and S. Paiva, "Double Perspective Data Envelopment Analysis: One Approach to Estimate the “LOOP” Arbitrage," iBusiness, Vol. 2 No. 4, 2010, pp. 354-362. doi: 10.4236/ib.2010.24046.
nullL. Novaes and S. Paiva, "Double Perspective Data Envelopment Analysis: One Approach to Estimate the “LOOP” Arbitrage," iBusiness, Vol. 2 No. 4, 2010, pp. 354-362. doi: 10.4236/ib.2010.24046.
References
[1] L. F. L. Novaes, “Double Perspective DEA in Real Estate Assessment with GIS,” D.Sc. Thesis, Coppe/UFRJ, 2002, pp. 20-26. [2] E. W. Eckard, “The Law of One Price in 1901,” Economic Inquiry, Vol. 42, No. 1, 2004, pp. 101-110. [3] T. K. Kuosmanen, L. Cherchye and T. Sipil?inen, “The Law of One Price in Data Envelopment Analysis: Restricting Weight Flexibility across Firms,” European Journal of Operational Research, Vol. 170, No. 3, 2006, pp. 735-757. [4] M. Baye, J. Morgan and P. Scholten, “Information, Search, and Price Dispersion,” In: T. Hendershott, Ed., Handbook on Economics and Information Systems, Elsevier, Forthcoming, 2006. [5] M. J. Farrell, “The Measurement of Productive Efficiency,” Journal of the Royal Statistical Society, Series A, General, Part 3, Vol. 120, No. 3, 1957, pp. 253-281. [6] A. Charnes, W. W. Cooper and Rhodes, “Measuring the Efficiency of Decision-Making Units,” European Journal of Operational Research, Vol. 2, No. 6, 1978, pp. 429- 444. [7] R. D. Banker, A. Charnes and W. W. Cooper, “Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis,” Management Science, Vol. 30, No. 9, 1984, pp.1078-1092. [8] R. F?re and G. Grosskopf, “Estimation of Returns to Scale Using Data Envelopment Analysis a Comment,” European Journal of Operation Research, Vol.79, No. 2, 1994, pp. 379-382. [9] M. E. Lins and L. A. Meza, “Data Envelopment Analysis and Integration Perspectives Decision Support Theory,” Coppe/UFRJ, 2006, pp. 7-53. [10] M. E. Lins, L. F. L. Novaes and L. F. L. Legey, “Real Estate Appraisal: A Double Perspective Data Envelopment Analysis Approach,” Journal of Operational Research, Vol. 138, No. 1, 2005, pp. 79-96. [11] G. Debreu, “Theory of Value: An Axiomatic Analysis of Economic Equilibrium,” In: Cowles Foundation for Research in Economics of Yale University, 1959, pp. 28-79. [12] F?re, R., G. Grosskopf and C. A. K. Lovell, “Production Frontiers,” Cambridge University Press, Cambridge, 1996. [13] R. F?re, C. A. K. Lovell and K. Zieschang, “Measuring the Technical Efficiency of Multiple Output Technologies”, W. Eichhorn, R. Henn, K. Neumann, Eds., 1983. [14] R. W. Shephard, “Cost and Production Function,” Princeton University Press, New Jersey, 1953. [15] Software: EDODEA. http:www.avalsoft.com.br [16] L. F. L.Novaes, M. E.Lins, S. A. Paiva and L. F. e Pinheiro Jr., “Avalia??o Imobiliária Pelo Método da Envoltória sob Dupla óptica,” 3o Simpósio Brasileiro de Engenharia de Avalia??es, Curitiba, 2002. [17] N. Cressie, “Statistics for Spatial Data,” 1st Edition, Wiley InterScience, New York, 1991. [18] E. H. Isaaks and R. M. Shrivastava, “Applied Geostatistics,” 1th Edition, Oxford University Press, New York, 1989.
[1] L. F. L. Novaes, “Double Perspective DEA in Real Estate Assessment with GIS,” D.Sc. Thesis, Coppe/UFRJ, 2002, pp. 20-26. [2] E. W. Eckard, “The Law of One Price in 1901,” Economic Inquiry, Vol. 42, No. 1, 2004, pp. 101-110. [3] T. K. Kuosmanen, L. Cherchye and T. Sipil?inen, “The Law of One Price in Data Envelopment Analysis: Restricting Weight Flexibility across Firms,” European Journal of Operational Research, Vol. 170, No. 3, 2006, pp. 735-757. [4] M. Baye, J. Morgan and P. Scholten, “Information, Search, and Price Dispersion,” In: T. Hendershott, Ed., Handbook on Economics and Information Systems, Elsevier, Forthcoming, 2006. [5] M. J. Farrell, “The Measurement of Productive Efficiency,” Journal of the Royal Statistical Society, Series A, General, Part 3, Vol. 120, No. 3, 1957, pp. 253-281. [6] A. Charnes, W. W. Cooper and Rhodes, “Measuring the Efficiency of Decision-Making Units,” European Journal of Operational Research, Vol. 2, No. 6, 1978, pp. 429- 444. [7] R. D. Banker, A. Charnes and W. W. Cooper, “Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis,” Management Science, Vol. 30, No. 9, 1984, pp.1078-1092. [8] R. F?re and G. Grosskopf, “Estimation of Returns to Scale Using Data Envelopment Analysis a Comment,” European Journal of Operation Research, Vol.79, No. 2, 1994, pp. 379-382. [9] M. E. Lins and L. A. Meza, “Data Envelopment Analysis and Integration Perspectives Decision Support Theory,” Coppe/UFRJ, 2006, pp. 7-53. [10] M. E. Lins, L. F. L. Novaes and L. F. L. Legey, “Real Estate Appraisal: A Double Perspective Data Envelopment Analysis Approach,” Journal of Operational Research, Vol. 138, No. 1, 2005, pp. 79-96. [11] G. Debreu, “Theory of Value: An Axiomatic Analysis of Economic Equilibrium,” In: Cowles Foundation for Research in Economics of Yale University, 1959, pp. 28-79. [12] F?re, R., G. Grosskopf and C. A. K. Lovell, “Production Frontiers,” Cambridge University Press, Cambridge, 1996. [13] R. F?re, C. A. K. Lovell and K. Zieschang, “Measuring the Technical Efficiency of Multiple Output Technologies”, W. Eichhorn, R. Henn, K. Neumann, Eds., 1983. [14] R. W. Shephard, “Cost and Production Function,” Princeton University Press, New Jersey, 1953. [15] Software: EDODEA. http:www.avalsoft.com.br [16] L. F. L.Novaes, M. E.Lins, S. A. Paiva and L. F. e Pinheiro Jr., “Avalia??o Imobiliária Pelo Método da Envoltória sob Dupla óptica,” 3o Simpósio Brasileiro de Engenharia de Avalia??es, Curitiba, 2002. [17] N. Cressie, “Statistics for Spatial Data,” 1st Edition, Wiley InterScience, New York, 1991. [18] E. H. Isaaks and R. M. Shrivastava, “Applied Geostatistics,” 1th Edition, Oxford University Press, New York, 1989.