Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/211087 
Year of Publication: 
2019
Series/Report no.: 
IFRO Working Paper No. 2019/10
Publisher: 
University of Copenhagen, Department of Food and Resource Economics (IFRO), Copenhagen
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.
Subjects: 
inverse hyperbolic sine
arcsinh
unit of measurement
scale factor
JEL: 
C1
C5
Document Type: 
Working Paper

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