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Empirical Analysis of Average Area per Room and House Price based on Two-way Fixed Effects Model -Evidence from China

Runsheng Rong*, Yushan Liu , Zhenhao Li, Shanshan Li, Jiahui Li

With the continuous warming and cyclical fluctuations of the real estate price in China the housing price is out of balance. The method about how to make rational investment decisions has become a hot issue. Our paper aims to help people to scan properties for sale and filter out properties with the greatest potential for future appreciation so as to greatly improve the accuracy of investment decisions. This paper uses the data provided by Institute of Electrical and Electronics Engineers (IEEE) CyberC. Based on the daily data of China’s real estate prices and related influencing factors from 2012 to 2018, a mathematical model with e as the base is established for housing prices and related factors through empirical research. The ordinary least squares model with double fixed effects is used for regression model. The modeling passes the endogeneity test using instrumental variables, the heteroscedastcity test is used to verify and adjust the heteroscedastcity of the model and the Mean Absolute Deviation (MAD) test is carried out on the fit degree of the model. This paper draws the following conclusions: the model passes the significance test and there is no obvious endogenous problem. Finally the MAD test result is 0.2815.