As the title already says, should log returns, instead of simple returns, be used in regression analysis? In this case, I want to analyse the impact of specific factors (Dividend yield etc.) on the return of the Dow Jones stock index.
I know that Fama-French have developed their 3 factor model using only simple returns, but I often hear quants using log returns because those are closer to iid properties than simple returns and, after all, the dependent variable in a regression needs to be iid.