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 is highly sensitive to outliers as they can skew the results significantly. - (B): False. Outliers can be present in the test set, and their impact depends on how they are handled during modeling. - (C): False. Outliers are data points significantly different from other data points, not close to them. - (D): True. Outlier treatment depends on the context of the problem and its relevance to the business objective.