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Re: st: transformations for highly skewed dependent variable

From   Michael Crain <[email protected]>
To   Statalist <[email protected]>
Subject   Re: st: transformations for highly skewed dependent variable
Date   Thu, 10 Sep 2009 19:17:15 -0400


Well, sure, there are a lot of possible transformations e.g.
arctangent or cube root, but what is the purpose of the
transformation?  Are you regressing y on X and thinking the errors
won't be normal?  In that case, you may not want to transform y.
Also, have you considered that the y~=0 obs might be somehow
qualitatively different?  Note that the sd of return should be
conditioned on size of investment, at least...

This is a bit off topic. I believe you are suggesting that transforming
variables to address non-normal errors is not so important in this 
case of an economic data set. Can you explain why? Does the 
economics field look past some of the GLM assumptions?


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