Units of Measurement and the Inverse Hyperbolic Sine Transformation

Publikation: Working paperForskning

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The inverse hyperbolic sine (IHS) transformation is frequently applied in econometric studies to transform right-skewed variables that include zero or negative values. We confirm a previous study that shows that regression results can largely depend on the units of measurement of IHS-transformed variables. Hence, arbitrary choices regarding the units of measurement for these variables can have a considerable effect on recommendations for policies or business decisions. In order to address this problem, we suggest a procedure for choosing units of measurement for IHS-transformed variables. A Monte Carlo simulation assesses this procedure under various scenarios and a replication of the study by Bellemare and Wichman (2019) illustrates the relevance and applicability of our suggested procedure.
OriginalsprogEngelsk
UdgiverDepartment of Food and Resource Economics, University of Copenhagen
Antal sider20
StatusUdgivet - 2019
NavnIFRO Working Paper
Nummer2019/10

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