Growth rate

[yael]

Hello

I have an example and I am not sure how to handle with the data

Firm	Sales	Year	Change
A	120	2007	-8%
A	130	2006	-7%
A	140	2005
B	15	2006	25%
B	12	2005	20%
B	10	2004

Should I use Lines A-2005 and B-2004 in column "change" as 0 or missing data?

Thanks a lot!

[ballardw]

I would say it would depend on what your are going to do with that change variable later. If I wanted average change rate from year to year I would not want the value to be 0 as you would end up with an n of 3 and (0 + -7 + -8)/3 would notably different from the apparent -7.5% change average. (Noting that averaging percents is a dangerous activity in general).

But for some modely I may need a 0 as a baseline.

[PGStats · Accepted solution]

Either,

Change = (Sales(y) - Sales(y-1)) / Sales(y-1); 

if Sales(y-1) is unknown (missing) then Change should be missing.

if Sales(y-1) is zero (new product, new company) then change should be +Infinity