Template-Type: ReDIF-Paper 1.0
Author-Name: Ghislain B. D. Aïhounton
Author-Name-First: Ghislain B. D.
Author-Name-Last: Aïhounton
Author-Email: aihountong@gmail.com
Author-Workplace-Name: Department of Food and Resource Economics, University of Copenhagen
Author-Name: Arne Henningsen
Author-Name-First: Arne
Author-Name-Last: Henningsen
Author-Email: arne@ifro.ku.dk
Author-Workplace-Name: Department of Food and Resource Economics, University of Copenhagen
Title: Units of Measurement and the Inverse Hyperbolic Sine Transformation
Abstract: 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.
Length: 20 pages
Creation-Date: 2019-12
File-URL: http://okonomi.foi.dk/workingpapers/WPpdf/WP2019/IFRO_WP_2019_10.pdf
File-Format: Application/pdf
Number: 2019/10
Classification-JEL: C1, C5 
Keywords: inverse hyperbolic sine, arcsinh, unit of measurement, scale factor
Handle: RePEc:foi:wpaper:2019_10