Researchers may want to estimate the percentage change of a variable, such as household wealth or corporate profits, that takes on economically significant nonpositive values. Using the logarithmic transformation, however, requires discarding observations with nonpositive values. This paper describes a possible solution to this problem-the inverse hyperbolic sine transformation-and shows how to implement this transformation optimally in the case of median regression. As an illustration of the usefulness of this transformation, I revisit a specification sometimes used to estimate the effect of tax incentives on household saving.
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Gale, W.G. & scholz, J.K., 1992.
"IRAS and Household Saving,"
Papers
9244, Tilburg - Center for Economic Research.
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