Ratio Analysis Using Rank Transformation

Ratio Analysis Using Rank Transformation This paper presents an alternate method for transforming financial ratios. Ratios are ranked and scaled into a uniform distribution with boundaries between 0 and 1. Conceptually, we suggest that this method solves a number of methodological problems associated with ratios, including constrained choice of regression models, ratio outliers, negative ratios, and non-normal distributions. Scaled ranks of financial ratios are also conceptually appealing because they appear to capture comparative ordinal data about cross-sectional relationships between firms. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Ratio Analysis Using Rank Transformation

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Kluwer Academic Publishers
Copyright © 1998 by Kluwer Academic Publishers
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
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