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IAI Actuarial Core Principles · Actuarial Statistics · Purpose and function of data analysis

A pension fund analyst reports that members who attended financial education sessions have higher savings than those who did not, and concludes the sessions cause higher savings. Attendance was voluntary. Which statement best identifies the weakness at the stage of drawing conclusions?

The weakness is self-selection and confounding: people who volunteer for sessions may already save more, so the observed association does not prove the sessions cause higher savings. Causation needs a controlled design or adjustment for confounders.

  1. AThe sample mean cannot be compared across two groups
  2. BVoluntary attendance may reflect self-selection, so confounding means causation is not establishedCorrect
  3. CSavings data must always be normally distributed
  4. DConclusions should never be drawn from observational data of any kind
  5. The median should have been used instead of the mean in all cases

Explanation

Members who choose to attend may already be more engaged or wealthier savers, so the difference may reflect this self-selection rather than the sessions. Observational data can show association, but a causal claim needs a designed experiment or control for confounders. The other options state rules that are not generally true.

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