ПРИКЛАДНАЯ ЭКОНОМЕТРИКА № 1 (17) 2010 Jan Magnus, Anatoly Peresetsky The price of Moscow apartments Key words: Hedonic prices, Moscow, pretesting. 1. <...> Introduction In this paper we attempt to explain and predict the price of apartments in Moscow in the year 2003. <...> The price of an apartment is hypothesized to depend on certain characteristics, such as size and location. <...> We thus follow the ‘hedonic method, ’ which goes back to Haas (1922) and was made popular in studies by Griliches (1961) on car prices and Chow (1967) on computer prices; see also Lancaster (1966) for the economic theory on which the hedonic method is based. <...> The asking price for an average apartment was $ 652/sqm in June 2000. <...> Six years later, in June 2006, the asking price for the same apartment had increased to $ 4072/sqm. <...> Currently Moscow is one of the most expensive property markets in the world (after Monaco and London), and it has the largest concentration of billionaires after New York and London. <...> Against such a volatile background the estimation and prediction of property prices is a hazardous exercise. <...> We do, however, have access to a very large and unique data set (about 15,000 observations), which gives us some hope of gaining insight into this market. <...> If we had been interested in the development of property prices over time, then we should have taken into account the state of the economy, the financial market, and expectations. <...> First, we model and estimate the price of an apartment as a function of characteristics as advertised on websites. <...> E-mail addresses: Magnus: magnus@uvt.nl; Peresetsky: peresetsky@cemi.rssi.ru 89 Ценообразование 1 We present a simple hedonic model for apartment prices in Moscow in the year 2003. <...> Based on some 15,000 observations we estimate the model and use the estimates for prediction. <...> Pretest issues are explicitly taken into account. <...> In addition to these two aims, we also wish to take a serious view towards pretesting and the fact that essentially all empirical work ignores the possible dangers of not accounting for it.2 In real estate economics, the hedonic method is used to account for the problem that buildings are heterogeneous, so that it is difficult to estimate the demand for buildings generically. <...> The hedonic method assumes that a house or apartment can be decomposed <...>