TY - UNPB

T1 - Units of Measurement and the Inverse Hyperbolic Sine Transformation

AU - Aïhounton, Ghislain B. D.

AU - Henningsen, Arne

PY - 2019

Y1 - 2019

N2 - 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.

AB - 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.

M3 - Working paper

T3 - IFRO Working Paper

BT - Units of Measurement and the Inverse Hyperbolic Sine Transformation

PB - Department of Food and Resource Economics, University of Copenhagen

ER -