In Stata, ihstrans() is a function that applies the inverse hyperbolic sine (IHS) transformation to a variable. The IHS transformation is used to deal with data that has skewness or includes zeros and negative values, making it a useful alternative to the log transformation.

Why use IHS?

1. Handles Zero and Negative Values: Unlike the natural logarithm (ln(x)), which is undefined for zero and negative numbers, the IHS transformation can be applied to the entire real line.
2. Similar to Log Transformation: For large values of x, the IHS transformation behaves similarly to the log transformation (ln(x)), making it useful for dealing with right-skewed distributions.
3. Reduces Skewness: It helps in normalizing highly skewed data, improving the interpretability and efficiency of regression models.

STATA CODE:

gen ihs_var = ihstrans(variable)

gen ihs_income = ihstrans(income)

This sample code will create a new variable ihs_income that contains the IHS-transformed values of income VARIAable.