FRM Part I · FRM Exam Part I · Machine-Learning Methods
In the logistic regression ln(p/(1-p)) = b0 + b1 x with b1 = 0.693, how does a one-unit increase in x affect the odds of the positive class, holding all else constant? (Use e^0.693 = 2.0.)
The odds of the positive class double. In logistic regression, the slope coefficient measures the change in log-odds per unit of the variable, so odds are multiplied by e raised to the coefficient, which is 2.0 here. The probability itself changes by a varying amount.
- AOdds doubleCorrect
- BProbability increases by 0.693
- CProbability doubles
- DOdds increase by 0.693
Explanation
The coefficient is the change in log-odds per unit of x, so odds are multiplied by e^0.693 = 2. The probability change is not constant and does not simply double, because the logistic function is nonlinear. Adding 0.693 applies only to log-odds.
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