Loading the player...
What is a 'Coefficient of Determination'
A coefficient of determination is a measure used in statistical model analysis to assess how well a model explains and predicts future outcomes. It is indicative of the level of explained variablity in the model. The coefficient, also commonly known as Rsquare, is used as a guideline to measure the accuracy of the model.
Next Up
BREAKING DOWN 'Coefficient of Determination'
One use of the coefficient of determination is to test the goodness of fit of the model. It is expressed as a value between zero and one. A value of one indicates a perfect fit, and therefore, a very reliable model for future forecasts. A value of zero, on the other hand, would indicate that the model fails to accurately model the dataset.
RELATED TERMS

Indicator
Indicators are statistics used to measure current conditions ... 
Variance
The spread between numbers in a data set, measuring Variance ... 
Statistics
A type of mathematical analysis involving the use of quantified ... 
Standard Deviation
1. A measure of the dispersion of a set of data from its mean. ... 
Descriptive Statistics
A set of brief descriptive coefficients that summarizes a given ... 
Forecasting
The use of historic data to determine the direction of future ...
Related Articles

Investing Basics
RSquared
Learn more about this statistical measurement used to represent movement between a security and its benchmark. 
Fundamental Analysis
Great Expectations: Forecasting Sales Growth
Predicting sales growth can be something of a black art, unless you ask the right questions. 
Retirement
Projected Returns: Honing The Craft
Find out how to forecast longterm returns on the three major asset classes. 
Investing Basics
Investing During Uncertainty
The inability to forecast future events can turn the markets upside down. Find out how to stay rightside up. 
Investing
Analyst Forecasts Spell Disaster For Some Stocks
The type of stock that analysts cover can heavily influence their predictions. 
Options & Futures
Forecasting Market Direction With Put/Call Ratios
Options are not only trading instruments but also predictive tools that can help us gauge the feelings of traders. 
Active Trading
Introduction To Stationary And NonStationary Processes
What to know about stationary and nonstationary processes before you try to model or forecast. 
Investing
How to Prepare for the Low Return Environment Ahead
Learn about the big takeaway from this week’s chart: Investors aiming for higher returns over the next five years should be prepared to stomach more volatility. 
Active Trading Fundamentals
SandRidge's 3 Key Financial Ratios (SDOC)
Learn more about SandRidge Energy, Inc., a history of the company's performance and financial stability through key financial ratios and its future outlook. 
Economics
A Statistic About the U.S. Economy that May Surprise You
Learn why many commentators seem to be pessimistically focused on the U.S. economy’s weak wage growth and manufacturing sector trouble.
RELATED FAQS

Do plane tickets get cheaper closer to the date of departure?
Read about when to buy flights. See how statistics can predict optimal pricing. Read about price volatility over time. Learn ... Read Answer >> 
Is Colombia an emerging market economy?
Learn the definition of an emerging market economy, and understand how Colombia, while not yet developed, meets the standards ... Read Answer >> 
What assumptions are made when conducting a ttest?
Learn what a ttest is, and discover the five standard assumptions that are made regarding the validity of sampling and data ... Read Answer >> 
What are some of the more common types of regressions investors can use?
Learn about the most common types of regressions investors use to model asset prices including linear regressions and multiple ... Read Answer >> 
What types of assets lower portfolio variance?
Learn what type of assets reduce portfolio variance and how modern portfolio theory uses correlation coefficients. Read Answer >> 
When is it better to use systematic over simple random sampling?
Learn when systematic sampling is better than simple random sampling, such as in the absence of data patterns and when there ... Read Answer >>