Actuarial Notes

CAS Exam MAS-II Spring 2019, Question 40

Study guide: Exam MAS-II

You perform two separate principal component analyses on the same four variables in a particular data set: X1, X2, X3, and X4. The first analysis centers but does not scale the variables, and the second analysis centers and scales the variables. The biplots of the first two principal components produced from these analyses are shown below. The location of Observation 24 is labeled on the plots as well.

Given the following statements:

I. X1 is more highly correlated with X2 than with X3. II. X3 has the highest variance of these four variables. III. Observation 24 has a relatively large, positive value for X4.

Determine which of the preceding statements are demonstrated in the biplots shown above.

  • A) None of I, II, or II are demonstrated in the biplots
  • B) I and II only
  • C) I and III only
  • D) II and III only
  • E) The answer is not given by (A), (B), (C), or (D)

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