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  • marginal effect when dependent variable is IHS transformed

    I have a following model:

    yi=alpha+beta Xi+gamma Di+epsiloni

    where yi is transformed using inverse hyperbolic sine (asinh) because of negative and positive values in the raw data, X is continuous variable and D is dummy variable. Suppose the estimated gamma coefficient is 0.20. How do you interpret this? I do know how to interpret when the explanatory variable is continuous, like Xi here.

  • #2
    Take a look here:

    Except for very small values of y, the inverse sine is approximately equal to log(2yi) or log(2)+log(yi), and so it can be interpreted in exactly the same way as a standard logarithmic dependent variable. For example, if the coefficient on "urban" is 0.1, that tells us that urbanites have approximately 10 percent higher wealth than non-urban people.

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    • #3
      Originally posted by Dimitriy V. Masterov View Post
      Take a look here:
      Thank you very much.

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