Society of Actuaries (SOA) PA Practice Exam

What is the purpose of checking for outliers in a Continuous predictor variable?

1. To confirm the mean is significant

2. To ensure data integrity and accuracy

3. To visualize distribution effectively

4. To simplify analysis with fewer variables

The correct answer is: To ensure data integrity and accuracy

The purpose of checking for outliers in a continuous predictor variable primarily revolves around ensuring data integrity and accuracy. Outliers can significantly distort analysis results by skewing statistical measures, such as the mean and standard deviation, leading to misleading conclusions. Identifying and addressing outliers is essential for maintaining the quality of the data set, which allows for more reliable modeling and predictions. While visualizing distribution might happen when examining outliers, this process helps in identifying and validating the data's underlying structure and may support better decision-making. However, the core purpose remains centered on safeguarding the overall data quality before proceeding with further analysis. Addressing outliers also implies that a correct interpretation of results and predictions is feasible, which is fundamental in statistical modeling and data analysis processes.