Exam MAS-I Practice Question 163
Study guide: Exam MAS-I
Ten policies' loss costs (in $00) are fitted by least squares with a step function of driver age X, using cutpoints c_1 = 25, c_2 = 45 and c_3 = 65:
y_i = \beta_0 + \beta_1 C_1(x_i) + \beta_2 C_2(x_i) + \beta_3 C_3(x_i) + \epsilon_iwhere C_1(X) = I(25 \le X < 45), C_2(X) = I(45 \le X < 65) and C_3(X) = I(65 \le X).
| Driver age | 19 | 23 | 28 | 36 | 44 | 45 | 52 | 60 | 66 | 74 |
|---|---|---|---|---|---|---|---|---|---|---|
| Loss cost | 9 | 11 | 7 | 6 | 8 | 8 | 6 | 4 | 7 | 9 |
Calculate \hat\beta_2. Give your answer as a whole number, with a minus sign if it is negative.
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