st: logistic tranformation, proportion variables

[Marck Bulter <177316mb@student.eur.nl>]

Dear Statalisters,

I have a question that is not entirely related to Stata. Do hope that 
you forgive me.

Assume the following model,

*ivreg* pstrmon price maturity age coupon pstrmonprev pstrprev intrest 
ivol compl (precmon = precmonprev)

Where pstrmon, pstrmonprev, precmon and precmonprev are all proportions. 
In this case, value bond A / total value bonds, etc. Therefore, it can 
take any value between 0 and 1, 0 and 1 included.
These  last 4 variables are heavily left skewed. Post estimations, resid 
is heteroskedastic, and resid is not normal distributed.
On the Statalist server I have found several references to logistic 
transformations, ln(y/1-y):
- http://www.stata.com/statalist/archive/2003-07/msg00285.html
- home.fsw.vu.nl/m.buis/presentations/UKsug06.pdf
- http://www.stata.com/statalist/archive/2006-02/msg00150.html

If I transform the 4 variables using logistic transformation, the 4 
variables or no longer skewed, resid is almost homoskedastic, and resid 
is almost normal distributed.
But my question is, is this transformation allowed, as I have mostly 
seen only references of transformation of the dependent variable.
In addition, the transformation makes the interpretation of the 
coefficients hard, any comment on this?


Kind regards,
Marck Bulter

A passionate Stata user.

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