Revision as of 06:18, 26 May 2023 by Admin (Created page with "Trevor is modeling monthly incurred dental claims. Trevor has 48 monthly claims observations and three potential predictors: *Number of weekdays in the month *Number of weeke...")
ABy Admin
May 26'23
Exercise
Trevor is modeling monthly incurred dental claims. Trevor has 48 monthly claims observations and three potential predictors:
- Number of weekdays in the month
- Number of weekend days in the month
- Average number of insured members during the month
Trevor obtained the following results from a linear regression:
| Coefficient | Standard Error | t Stat | p-value | |
|---|---|---|---|---|
| Intercept | –45,765,767.76 | 20,441,816.55 | –2.24 | 0.0303 |
| Number ofweekdays | 513,280.76 | 233,143.23 | 2.20 | 0.0330 |
| Number ofweekend days | 280,148.46 | 483,001.55 | 0.58 | 0.5649 |
| Average numberof members | 38.64 | 6.42 | 6.01 | 0.0000 |
Determine which of the following variables should be dropped, using a 5% significance level.
- Intercept
- Number of weekdays
- Number of weekend days
- Number of members.
- I only
- II only
- III only
- IV only
- None should be dropped from the model
Copyright 2023. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.
ABy Admin
May 26'23
Key: C
Only variables with a p-value greater than 0.05 should be considered. Because only one of the variables (Number of weekend days) meets this criterion, it should be dropped.
Copyright 2023. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.