Practical Regression: Log vs. Linear Specification Case Solution & Answer

This Case is about FINANCIAL MANAGEMENT, MARKET RESEARCH

PUBLICATION DATE: June 11, 2012 PRODUCT #: KEL641-PDF-ENG

This is the seventh in a number of lecture notes which, if combined together into a textbook, might be labelled “Practical Regression.” The aim of the notes would be to supplement the theoretical content of the majority of statistics texts with practical advice based on almost three decades of expertise of the writer, joined with over one hundred years of expertise of co-workers that have offered guidance. As the name “Practical Regression” implies, these notes are a guide to performing regression in practice. This note describes the best way to select between log and linear specification. The note highlights the way to interpret coefficients in a log regression and the economic interpretation of a log model. The note concludes by describing the best way to select between linear and log specifications on econometric reasons, including an explanation of the Box-Cox test.

Related Case Solutions:

Practical Regression: Causality and Instrumental Variables Practical Regression: Maximum Likelihood Estimation Practical Regression: From “Stylized Facts” to Benchmarking Practical Regression: Noise, Heteroskedasticity, and Grouped Data Practical Regression: Introduction to Endogeneity: Omitted Variable Bias Practical Regression: Log vs. Linear Specification Practical Regression: Regression Basics Practical Regression: Regression Basics Simple Linear Regression Linear & Logistics Regression