Society of Actuaries (SOA) PA Practice Exam

Which of the following is an advantage of Stratified Random Sampling over Simple Random Sampling?

1. It allows for more data to be collected.

2. It increases the chances of bias in the sample.

3. It produces a sample population that better represents the entire population.

4. It simplifies the sampling process.

The correct answer is: It produces a sample population that better represents the entire population.

Stratified Random Sampling offers a significant advantage by producing a sample population that better represents the entire population. This methodology entails dividing the population into distinct subgroups, or "strata," which share similar characteristics. By ensuring that samples are selected from each of these strata in a proportionate manner, the resulting data becomes more reflective of the overall diversity present within the population. This representation is particularly beneficial when certain subgroups may be underrepresented or overrepresented in a Simple Random Sampling method, where each individual has an equal chance of selection without regard to their subgroup membership. In contrast, the stratified approach takes these differences into account, allowing for a more accurate reflection of the population's characteristics. In this context, the increased representation reduces sampling error and enhances the reliability of the conclusions drawn from the sample. As a result, decisions made based on data collected through stratified sampling tend to be more informed and valid.