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Sunday, November 20, 2011

"a constant quality price index that takes into account the huge variety in domain names. The quality of the domain names is controlled for by empirical estimation techniques called hedonic regression and hedonic repeat sales regression. The empirical work is based on more than 200,000 real domain transactions from, the largest domain market place, spanning the years 2005-2011.

Why is it essential to consider the quality of domains when estimating an index? Taking the average of transaction prices gives a first indication of price developments but does not control for quality differences in the domains sold. If there is a time period in which more high-quality domains are sold, the average transaction price will increase, regardless of any true trend in prices. Putting it differently, one is comparing apples to oranges."

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