Regression analysis of proportions in finance with self selection
Numerous papers in finance study the conditional mean of some proportion or fraction with a mass point at zero. We argue that most, if not all, of these studies use mis-specified statistical models, especially when firms or individuals choose to not do something for different reasons. To address these issues, we develop a new statistical model, the zero-inflated beta model, and apply it to the analysis of corporate capital structure decisions to demonstrate its applicability.
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