Exam MAS-II Practice Question 7
Study guide: Exam MAS-II
An actuary fits a sequence of increasingly flexible models to predict claim severity, Y = f(X) + \varepsilon, and records each model's mean squared error (MSE) on the training data and on a large test set.
Determine which of the following statements are true.
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I. Once a model has started to overfit, the test MSE can be pushed below
\text{Var}(\varepsilon)by adding still more flexibility. -
II. As flexibility increases, the training MSE decreases, while the test MSE typically falls and then rises in a U-shape.
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III. A model is said to overfit when a less flexible model would have yielded a smaller test MSE.
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A) I only
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B) I and II only
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C) I and III only
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D) II and III only
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E) The answer is not given by (A), (B), (C), or (D)
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