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- Upside: make life easy both practically
(problems may evaporate, e.g. outliers become less severe) and
theoretically (normal theory results, t-tests, p-values are credible)
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- Downside: may be hard to interpret
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- Rationale:
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- Symmetry - ``middle'' well defined
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- Easier to compare with normal (ie heavy tailed).
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- Methodology may require symmetry (ie normal theory)
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- Facilitates comparisons between observations that are on
the same scale but far apart, (ie changes in Microsoft sales
and changes in Apple's).
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- May be more interpretable - aid in decision making. Unit
costs rather than total costs.
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- May put data onto a more useful scale, ie transform proportions
with a logit transform.
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- Can make comparisons easier by stabilizing variance
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- Can transform to obtain additivity (ie Cobb-Douglas)
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- Interaction may only be present due to modeling on the wrong scale,
so that transformation erases the need for interaction.
Next: 3.2
Up: 3.
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Richard Waterman
1999-09-30