Exam MAS-II Practice Question 15

Study guide: Exam MAS-II

An actuary building a frequency model with many candidate rating variables replaces an ordinary Poisson GLM with an elastic net GLM. The elastic net estimates the coefficients by minimizing the deviance plus \lambda times a penalty that is a weighted average of the sum of absolute coefficients and half the sum of squared coefficients.

Determine which of the following statements are true.

• I. Raising \lambda shrinks the coefficients toward zero, and some less important predictors can be given coefficients of exactly zero.

• II. The intercept is penalized like every other coefficient, so raising \lambda also pulls the overall predicted frequency toward zero.

• III. Compared with an ordinary GLM, the elastic net is more prone to unstable, very large coefficients when predictors are highly correlated.

• A) I only

• 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)

Answer this question and see the worked solution

Concepts tested

• Extended Linear Model
• Regularization
• Generalized Linear Model

More questions from this set

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