Work

Units of measurement and the inverse hyperbolic sine transformation

Year: 2020

Type: article

Abstract: Summary The inverse hyperbolic sine (IHS) transformation is frequently applied in econometric studies to transform right-skewed variables that include zero or negative values. We show that regression results can heavily 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 an empirical illustration shows the relevance and applicability of our suggested procedure.

Source: Econometrics Journal

DOI: 10.1093/ectj/utaa032

Authors: Ghislain B D Aihounton, Arne Henningsen

Institutions: University of Copenhagen, Université de Parakou

Language: English

Topic: Advanced Statistical Methods and Models

Subfield: Statistics and Probability

Field: Mathematics

Domain: Physical Sciences

Open Access status: green

Funder: Udenrigsministeriet

Award: G4365471324