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This analysis is simplistic and flawed. It asserts a correlation between the fried chicken/coffee shop ratio index and home price, which is reasonable enough.
by JackFr 11y ago
This analysis is simplistic and flawed.
It asserts a correlation between the fried chicken/coffee shop ratio index and home price, which is reasonable enough. It then assumes that homes that are undervalued vis-a-vis their implied value by the FC/CS index are up and coming. This likely makes sense in an environment of overall rising house prices. However if house prices are falling or stagnant overall it may be the coffee shops which are lagging the market.
- forrestthewoods 11y agoSo it just missing a term then? Add in rising prices and call it a day?
- thanatropism 11y agoThe Fritsch-Waugh-Lovell theorem: if y = ax + by + cz + (zero-mean nuisance), I can estimate a least-squares model of the form y' = ax + b*y + (zero-mean nuisance) and get a correct estimate of b, as long as y and z are uncorrelated. (Where this breaks down: for example, a regression of IQ on age and arm length; omit age and you'll get longer arms (older kids) producing higher IQ scores, because age and arm length are correlated.)
- wuliwong 11y agoIf I am understanding you correctly it seems that you only have an issue if coffee shop count is 'lagging the market' but you never actually say whether you believe it is? It seems that you are just pointing out the obvious; this person's analysis assumes that coffee shop count is a leading indicator but you are not giving any reason why this is a flawed assumption.