For a regression model of executive compensation, you are given:

• Executive Compensation
  Coefficients:	Estimate	Std. Error	-statistic	-value
  (INTERCEPT)	–28,595.5	220.5	–129.7	<0.001
  AGEMINUS35	7,366.3	12.5	588.1	<0.001
  TOPSCHOOL	50.0	119.7	0.4	0.676
  LARGECITY	147.9	119.7	1.2	0.217
  MBA	2,490.9	119.7	20.8	<0.001
  YEARSEXP	15,286.6	7.2	2132.8	<0.001

• The acceptable significance level is [math]α = 0.10.[/math]

Determine which variable or variables should be removed first prior to rerunning the model.

• (INTERCEPT)
• AGEMINUS35, MBA, and YEARSEXP
• TOPSCHOOL
• TOPSCHOOL and LARGECITY
• YEARSEXP

Copyright 2023. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.

Key: C

The variables TOPSCHOOL and LARGECITY both lack significance and are candidates for removal. However, only one variable should be removed at a time, and it should be the one with the highest p-value, which is TOPSCHOOL. After removing TOPSCHOOL and rerunning the model it is possible that LARGECITY will become significant.

Copyright 2023. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.