Statalist The Stata Listserver


[Date Prev][Date Next][Thread Prev][Thread Next][Date index][Thread index]

st: RE: Grid Search in a Log Plus Constant Model


From   "Scott Merryman" <smerryman@kc.rr.com>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: RE: Grid Search in a Log Plus Constant Model
Date   Wed, 8 Nov 2006 19:03:27 -0600

Another possibility is the inverse hyperbolic since transformation.  A
recent paper that uses this method is available at:

http://www.bepress.com/bejeap/contributions/vol5/iss1/art20/

The data and Stata code is also available to download.

Scott


AUTHOR: 
Karen M. Pence, Federal Reserve Board of Governors

TITLE: 
The Role of Wealth Transformations: An Application to Estimating the Effect
of Tax Incentives on Saving 

SUGGESTED CITATION: 
Karen M. Pence (2006) "The Role of Wealth Transformations: An Application to
Estimating the Effect of Tax Incentives on Saving", Contributions to
Economic Analysis & Policy: Vol. 5: No. 1, Article 20. 
http://www.bepress.com/bejeap/contributions/vol5/iss1/art20 
 
 
ABSTRACT: 
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.  
 

> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-
> statalist@hsphsun2.harvard.edu] On Behalf Of paul d jacobs
> Sent: Wednesday, November 08, 2006 3:46 PM
> To: statalist@hsphsun2.harvard.edu
> Subject: st: Grid Search in a Log Plus Constant Model
> 
> I am working with health data (MEPS) where
> out-of-pocket medical expenses (OOP) are a dependent
> variable in an OLS regression.  Because of the
> positive skewness of such a variable, I would like to
> use a normalizing transformation, i.e. the log of OOP.
>  However, because of the many zero observations for
> OOP, the options are to either add a constant to OOP,
> (some have used $1 arbitrarily), or to model the data
> separately for the zeroes and the positive values,
> which I'd rather not do.  (I have also considered the
> square root transformation, etc., but would like to
> test out the results using a log-constant).
> 
> My question is:  do you know of a method for searching
> for the optimal constant to add to a variable so that
> a log-transformation produces the optimal result?  Deb
> et al. (2005), suggest a 'grid search' for this value
> (see link below for document).  I know that grid
> searches are used in the context of maximum
> likelihood; is this a similar process?  Would running
> the model with different values and comparing R2s and
> standard errors be more appropriate?
> 


*
*   For searches and help try:
*   http://www.stata.com/support/faqs/res/findit.html
*   http://www.stata.com/support/statalist/faq
*   http://www.ats.ucla.edu/stat/stata/



© Copyright 1996–2014 StataCorp LP   |   Terms of use   |   Privacy   |   Contact us   |   What's new   |   Site index