Understand how to use a hierarchical model.
Free CAS MAS-II (Modern Actuarial Statistics II) lesson in Linear Mixed Models. 11 min read, ~1,686 words.
Hierarchical means grouped data with random effects. Level-1 units (claims, years, students) nest inside Level-2 groups (territories, schools, drivers). Random effects capture group-to-group variation. Random intercept model:, with,. ICC is the share of total variance between groups. BLUP shrinkage: the predicted group effect, with shrinkage factor. Larger shrinks less. Partial...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Key Takeaways
- Exam Shortcuts
Learning objectives
- B2
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