Society of Actuaries (SOA) PA Practice Exam

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What key element should be evaluated when analyzing a Factor predictor variable in univariate analysis?

  1. Correlation with the target variable

  2. Distribution of predictor values

  3. Bar chart showing counts of observations

  4. Histogram of the target variable

The correct answer is: Bar chart showing counts of observations

When analyzing a Factor predictor variable in univariate analysis, it is essential to focus on the bar chart showing counts of observations for each level of the factor. This visualization effectively summarizes the frequency distribution of categories within the factor variable, allowing analysts to quickly discern the relative sizes of each category. Understanding how many observations fall into each category helps in assessing the variable's importance and its overall role in predicting the target variable. In the context of factor variables, which are categorical in nature, utilizing a bar chart enables one to identify any potential imbalances or dominant categories that could influence the model's behavior. This insight can guide further analysis, such as exploring the relationship between the factor and the target variable.

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