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From |
Erasmo Giambona <e.giambona@gmail.com> |

To |
statalist <statalist@hsphsun2.harvard.edu> |

Subject |
st: Economic Significance and Logged Independent Variables |

Date |
Wed, 8 Jul 2009 15:09:23 +0200 |

Dear Statalist, I have a panel dataset for a sample of publicly listed firms. I am fitting the following model using OLS: Debt/Total Assetsi = a + b*ln_Total_Assets + control variables + firm dummies + year dummies + ei. - where i is a subscript for firm i. The dependent variable is total Debt divided by Total Assets (both expressed in millions), which is a ratio ranging between 0 and 1; ln_Total_Assets is the natural logarithm of total assets. The output of the above regression shows that ln_Total_Asset is statistically significant at the 1% level. This variable has also a huge economic effect. In fact, a 1 standard deviation increase in ln_Total Assets causes Debt/Total Assetsi to increase by 0.15 (while its average is 0.202). Then, I run Debt/Total Assetsi = a + b*Total_Assets + control variables + firm dummies + year dummies + ei. This model differs from the above one only because I am not logging Total_Assets. In this case, I find that Total Assets is still highly statistically significant at the 1% level. However, its economic effect is negligible. In fact, a 1 standard deviation increase in Total Assets causes Debt/Total Assetsi to increase by 0.0002 (while its average is 0.202). I can see that logging a variable can make a difference on its economic effect. However, changing the economic effect from 0.15 to 0.0002 seems really a big difference. Can somebody provide some hints on why this might be happening? Is that an indicatio that there might be something special about the structure of my data? I would really appreciate any suggestions. Thanks, Erasmo * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**Follow-Ups**:**Re: st: Economic Significance and Logged Independent Variables***From:*Austin Nichols <austinnichols@gmail.com>

**st: AW: Economic Significance and Logged Independent Variables***From:*"Martin Weiss" <martin.weiss1@gmx.de>

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