ABy Admin
May 25'23

Exercise

Determine which of the following statements describe the advantages of using an alternative fitting procedure, such as subset selection and shrinkage, instead of least squares.

  • Doing so will likely result in a simpler model
  • Doing so will likely improve prediction accuracy
  • The results are likely to be easier to interpret
  • I only
  • II only
  • III only
  • I, II, and III
  • The correct answer is not given by (A), (B), (C), or (D)

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

ABy Admin
May 26'23

Key: D

Alternative fitting procedures will tend to remove the irrelevant variables from the predictors, thus resulting in a simpler and easier to interpret model. Accuracy will likely be improved due to reduction in variance.

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

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