Society of Actuaries (SOA) PA Practice Exam

Which graphical method is suggested for assessing a Continuous predictor variable with a binary target variable?

1. Box plots summarizing means and medians

2. Separate histograms for each binary target

3. Bar charts of predictor counts

4. Scatter plots comparing the two variables

The correct answer is: Separate histograms for each binary target

When assessing a continuous predictor variable with a binary target variable, the suggested graphical method is to use separate histograms for each category of the binary target. This approach allows for a clear visual representation of the distribution of the continuous variable within each group defined by the binary outcome. By plotting the continuous variable separately for each category of the binary target, one can easily discern differences in the distributions, which may enable insights into how the predictor influences the binary outcome. Using separate histograms facilitates the identification of patterns, such as shifts in the mean or median, as well as variations in the spread of the data between the two groups. This can be particularly helpful for hypothesis generation, leading to a deeper analysis of the relationship between the continuous predictor and the binary outcome. While box plots could also summarize key statistics of the continuous variable by target group, they do not provide the same level of detail regarding the distribution shape and density. Scatter plots are effective for examining relationships between two continuous variables but do not apply when one is binary. Bar charts would not be appropriate as they represent categorical data rather than continuous distributions. Therefore, separate histograms are the most suitable method for this analysis.