The independent variable is not logged.
Here's the example
ln(fees) = 0.52625(assets) + .....
where 0.52625 is beta, the coefficient
I want to derive the effect on fees. I'm pretty sure that the effect on fees is fees*e^(0.52625)for a one unit change in assets, but how can I go from the equation above to this result?How do I find the change in a logged dependent variable for a one unit increase in an independent variable?
You have ln(y(x)) = a + bx. The notation "y(x)" means "y evaluated at x" not y times x.
So for a unit change in x, that is, from x to x+1 we get
ln(y(x+1)) = a + b(x+1)
ln(y(x)) = a + bx
ln(y(x+1)) - ln(y(x)) = b
y(x+1)/y(x) = exp(b)
To conver to a % change per unit increase in x do the following:
100*(y(x+1)/y(x) - 1) = 100*(exp(b) - 1)
Math Rules!How do I find the change in a logged dependent variable for a one unit increase in an independent variable?
If ln(fees) = k*assets
then:
fees = e^(k*assets).
That is the definition of a base e logarithm, denoted by 'ln'.
If you have two lots f1 and f2 of fees withcorresponding assets a1 and a2, then:
f1 = e^(k*a1)
f2 = e^(k*a2)
f2 / f1 = e^(k * (a2 - a1)).
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