Determine which of the following statements is true

• Linear regression is a flexible approach
• Lasso is more flexible than a linear regression approach
• Bagging is a low flexibility approach
• There are methods that have high flexibility and are also easy to interpret
• None of (A), (B), (C), or (D) are true

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

Key: E

A is false, linear regression is considered inflexible because the number of possible models is restricted to a certain form.

B is false, the lasso determines the subset of variables to use while linear regression allows the analyst discretion regarding adding or moving variables.

C is false, bagging provides additional flexibility.

D is false, there is a tradeoff between being flexible and easy to interpret.

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