Exam MAS-I Practice Question 125

Study guide: Exam MAS-I

A loss ratio $Y$ is regressed on three predictors $x_1$ , $x_2$ and $x_3$ by least squares. To build the added variable plot for $x_3$ , the analyst regresses $Y$ on $x_1$ and $x_2$ and keeps the residuals $e_Y$ , regresses $x_3$ on $x_1$ and $x_2$ and keeps the residuals $e_{x_3}$ , and plots $e_Y$ against $e_{x_3}$ .

Which statement about this plot is correct?

A) The least squares line through it has intercept zero and slope equal to the coefficient of $x_3$ in the full model
B) The least squares line through it has slope equal to the coefficient from regressing $Y$ on $x_3$ alone
C) Its horizontal axis is $x_3$ itself, so curvature in it is the best guide to the transformation $x_3$ needs
D) Its vertical axis holds the residuals of the full three-predictor model, so it repeats the residual plot
E) A point far from zero on its horizontal axis has a large residual, so it is an outlier in the response

Answer this question and see the worked solution

Exam MAS-I Practice Question 125

Concepts tested

More questions from this set