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Tuesday, December 22, 2020
Regression transformation with ln and squared values
Hello, I assume a nonlinear relationship between TobinsQ and sumholdingpct.
Is it then appropriate to apply variable transformation on both sides?
I thought about logarithm transformation for the dependent variable and also including squared variables for the main independent variable of interest at the same time?
Or should i just use a transformation on the independent variable of interest?
Something like this:
reg ln(TobinsQ) SumHoldingPct SumHoldingPct^2 DebtTotalAssets Dividend FirmSize QuickRatio SalesGrowth i.year i.industry i.country, robust cluster(industry)
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