Endogeneity Issues

 There is a concern that the variable representing relinquished exchanges, EXRELQ,

is not exogenous with respect to selling price. For example, an omitted factor such as

extreme price appreciation, which is correlated with both the probability for a sale to be

part of a relinquished exchange as well as selling price, could cause a significant

relationship between the variable representing that the sale is part of a relinquished

exchange and the selling price. To address these concerns, I perform a Durbin-Wu-

Hausman (DWH) test for endogeneity. I estimate the base OLS Model II using two-stage

least squares regressions, where EXRELQ is an endogenous variable. The DWH test first

estimates the endogenous variable as a function of all exogenous variables. In the second

stage it regresses the dependent variable (in this case, natural log of price) on all variables

and includes the residuals of the endogenous variable. The second stage coefficient

estimates, when performing this procedure, are not different from the coefficients

estimated in the original model. Also the DWH test shows that there is no severe bias in

the OLS model estimates. Therefore, the results from the OLS model appear to be robust

to endogeneity concerns.