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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 Rsquare, is used as a guideline to measure the accuracy of the model.
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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.
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