Coefficient of Determination

AAA

DEFINITION of 'Coefficient of Determination'

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 R-square, is used as a guideline to measure the accuracy of the model.

INVESTOPEDIA EXPLAINS '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.

VIDEO

RELATED TERMS
  1. Variance

    The spread between numbers in a data set, measuring Variance ...
  2. Statistics

    A type of mathematical analysis involving the use of quantified ...
  3. Forecasting

    The use of historic data to determine the direction of future ...
  4. Indicator

    Statistics used to measure current conditions as well as to forecast ...
  5. Standard Deviation

    1. A measure of the dispersion of a set of data from its mean. ...
  6. Descriptive Statistics

    A set of brief descriptive coefficients that summarizes a given ...
Related Articles
  1. Great Expectations: Forecasting Sales ...
    Fundamental Analysis

    Great Expectations: Forecasting Sales ...

  2. Projected Returns: Honing The Craft
    Retirement

    Projected Returns: Honing The Craft

  3. Investing During Uncertainty
    Investing Basics

    Investing During Uncertainty

  4. Analyst Forecasts Spell Disaster For ...
    Investing

    Analyst Forecasts Spell Disaster For ...

comments powered by Disqus
Hot Definitions
  1. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  2. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  3. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  4. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  5. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  6. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
Trading Center