Question

Which of the following is/are true about outliers?
(A) Linear Regression is not sensitive to outliers.
(B) Outliers can never be present in the test set.
(C) Outlier is a data point that is significantly close to other data points.
(D) The nature of our business problem determines how outliers are used.
Choose the correct answer from the options given below:

• A. (B) and (D) only.
• B. (C) and (D) only.
• C. (A), (C) and (D) only.
• D. (D) only.

Hint:

Always analyze the context of the problem to determine the treatment of outliers. Outliers may provide valuable insights or distort results.

Answer 1

The Correct Option is D

- (A): False. Linear regression exhibits high sensitivity to outliers, which can significantly skew results. - (B): False. Outliers can exist within the test set, and their impact is contingent on their handling during modeling. - (C): False. Outliers are data points substantially dissimilar from others, not in close proximity. - (D): True. Outlier treatment is determined by the problem's context and its relevance to the business objective.