Dear Stack community,
My question is the following;
If my dependent variable is twelve month returns.
And as independent variables I have fiscal year variables like ROA and log variables like the log of the market value.
Where ROA = Net income / total assets
Should I scale ROA either as a fraction (e.g 0.05), a log (e.g -1.30) or a % (e.g 5%).
And similarly how should I scale returns?
I guess the anwser depends on what change I want to analyze.
However if I want to fit both slopes in a graph over time and interpret their coefficients for a cross section of stocks, would it make most sense to use a fraction, % or log for ROA?
Any clear intuition for this...?