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May 25'23
Exercise
Determine which of the following statements is/are true.
- The number of clusters must be pre-specified for both K-means and hierarchical clustering.
- The K-means clustering algorithm is less sensitive to the presence of outliers than the hierarchical clustering algorithm.
- The K-means clustering algorithm requires random assignments while the hierarchical clustering algorithm does not.
- I only
- II only
- III only
- I, II and II
- The correct answer is not given by (A), (B), (C), or (D)
Copyright 2023. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.
May 26'23
Key: C
I is false because the number of clusters is pre-specified in the K-means algorithm but not for the hierarchical algorithm.
II is also false because both algorithms force each observation to a cluster so that both may be heavily distorted by the presence of outliers.
III is true.
Copyright 2023. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.