Hi, I need help with the following:
In my dataset, I have two independent variables A and B. A is the difference between 65 and age (So, it ranges from -35 to + 40) and B is the ratio of Executives salary/ Total assets. For creating a composite score of these two variables, I need to add A and B. Since these two variables are on different scales, we can either standardize or normalize the two variables and add them to form a composite score/index/measure. My confusion is " Which one will I do? Will I standardize or normalize?
I have a feeling that I should normalize because in A we already have zero whose meaning in raw data and standardize data (if we standardize) will be different. But if I normalize, how will I explain the result economically?
Could you please help me? Are there any other options for me except standardizing/normalizing and then adding the two?
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