Abstract
Owen J. Shoemaker (1997) "Performance Comparisons of Laspeyres Indexes with Geometric Mean Indexes in the U.S. Consumer Price Index."
The official U.S. Consumer Price Index (CPI) is a
Laspeyres index. An alternative form of the index known as
the geometric mean (GeoMeans) index is scheduled to be
published in 1997. In this paper, rental housing data have
been studied with regard to rent levels, to the average
weights attributed to these levels and to the average rate of
rental price change at these levels. These weights are
quantity-based. A two-partition model is constructed, with
"low" rents compared with "higher" rents.
Simulations are run comparing Laspeyres and GeoMeans index
results. The differences between the two indexes are plotted
against the rate of price change in the "low" rent
sector. In the simulations, all the other factors are treated
as fixed. A smooth (quadratic) curve results, and the
GeoMeans indexes are shown to score consistently higher than
the Laspeyres indexes.
Last Modified Date: July 19, 2008
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