<p>I am going through the paper referenced below, and I am struggling to understand the reasoning behind the equation to calculate their dependent variable. Please could you help me with that?</p>
<p>Paper of reference: <a href="https://epub.uni-regensburg.de/54281/9/2023-05%20Sebastian-Noth-Grafe_Commission-Ban.pdf" rel="nofollow noreferrer">https://epub.uni-regensburg.de/54281/9/2023-05%20Sebastian-Noth-Grafe_Commission-Ban.pdf</a> (i.e., paper is called 'The Effect of Commission Bans on Household Wealth: Evidence from OECD Countries', by: Sebastian et al.)</p>
<p>dependent variable (see table 1): &quot;the approximate performance of invested money of all private households&quot;. They &quot;use the intuitive definition of invested money by assuming that investments happen at the end of the period.&quot; Therefore, they &quot;extract the wealth gain less savings (i.e., household wealth development less currency, deposits and savings in relation to household assets).&quot;</p>
<p>Return_on_invested_wealth = ln(Change_invested_wealth)-Saving_as_%_of_household_income -1</p>
<p>I am wondering why are they taking the change of invested wealth and not the change in saving rate too?</p>
<p>And why are they taking the ln of change_invested_wealth?</p>

CC BY-SA 4.0
2024-07-24T11:44:39.223Z
You quote "less currency, deposits and savings *in relation to household
assets*" rather than "Saving_as_%_of_*household_income*"
Henry
CC BY-SA 4.0
2024-07-24T11:47:14.613Z
If they have done this sensibly, they would have used `ln(current invested wealth)-ln(previous invested wealth)` which is close to fractional change in invested wealth.  I am not sure why they then subtract 1.
Henry
<finance><regression><statistics>
Why taking ln() of change in invested wealth? Methodology of a published paper
Simo
# Why taking ln() of change in invested wealth? Methodology of a published paper

(Asked by: username_0 on 2024-07-23)

I am going through the paper referenced below, and I am struggling to understand the reasoning behind the equation to calculate their dependent variable. Please could you help me with that?

Paper of reference: <https://epub.uni-regensburg.de/54281/9/2023-05%20Sebastian-Noth-Grafe_Commission-Ban.pdf> (i.e., paper is called 'The Effect of Commission Bans on Household Wealth: Evidence from OECD Countries', by: Sebastian et al.)

dependent variable (see table 1): "the approximate performance of invested money of all private households". They "use the intuitive definition of invested money by assuming that investments happen at the end of the period." Therefore, they "extract the wealth gain less savings (i.e., household wealth development less currency, deposits and savings in relation to household assets)."

Return\_on\_invested\_wealth = ln(Change\_invested\_wealth)-Saving\_as\_%\_of\_household\_income -1

I am wondering why are they taking the change of invested wealth and not the change in saving rate too?

And why are they taking the ln of change\_invested\_wealth?

**Tags:** finance, regression, statistics
> **Comments:**
> **username_1**: You quote "less currency, deposits and savings *in relation to household assets*" rather than "Saving_as_%_of_*household_income*"  
> **username_1**: If they have done this sensibly, they would have used `ln(current invested wealth)-ln(previous invested wealth)` which is close to fractional change in invested wealth.  I am not sure why they then subtract 1.  

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## 0 answers

