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Question 2

This question will ask you to provide missing code segments.

A logistic regression model was fit on a data set where 40% of the outcomes were events (TARGET=1) and 60% were non-events (TARGET=0). The analyst knows that the population where the model will be deployed has 5% events and 95% non-events. The analyst also knows that the company's profit margin for correctly targeted events is nine times higher than the company's loss for incorrectly targeted non-event.

Given the following SAS program:

What X and Y values should be added to the program to correctly score the data?

    Correct Answer: C

    The logistic regression model's priorevent parameter (X) should be set to the proportion of events in the population where the model will be deployed, which is 0.05. For the Y value, to correctly target events considering the company's profit margin, you need to set a cut-off probability for deciding if an observation should be classified as an event (TARGET=1). The ratio of the profit margin for correctly targeted events to the cost of incorrectly targeted non-events suggests a threshold calculation. Since the logistic model was originally fit on a population with 40% events, Y should be set to 0.40 to match this ratio. Thus, X should be 0.05 and Y should be 0.40.

Discussion
maddarsi

Hello, Can someone help ? How "Y" is calculated ?