Residual Sum Of Squares - RSS

AAA

DEFINITION of 'Residual Sum Of Squares - RSS'

A statistical technique used to measure the amount of variance in a data set that is not explained by the regression model. The residual sum of squares is a measure of the amount of error remaining between the regression function and the data set. A smaller residual sum of squares figure represents a regression function which explains a greater amount of the data.

INVESTOPEDIA EXPLAINS 'Residual Sum Of Squares - RSS'

It is not possible to draw conclusions about the correctness of the regression function solely using the residual sum of squares. Since a sufficiently complex regression function can be made to closely fit virtually any data set, further study is necessary to determine whether the regression function is in fact useful in explaining the variance of the data set. Typically, however, a smaller residual sum of squares is ideal

RELATED TERMS
  1. Sum Of Squares

    A statistical technique used in regression analysis. The sum ...
  2. Stepwise Regression

    The step-by-step iterative construction of a regression model ...
  3. Autoregressive

    A stochastic process used in statistical calculations in which ...
  4. Regression

    A statistical measure that attempts to determine the strength ...
  5. Sampling Error

    A statistical error to which an analyst exposes a model simply ...
  6. Residual Standard Deviation

    A statistical term used to describe the standard deviation of ...
Related Articles
  1. To measure the risk of a particular equity, many investors turn to beta.
    Investing Basics

    Calculating Beta: Portfolio Math For ...

  2. Investing Basics

    Regression Basics For Business Analysis

  3. Options & Futures

    Bettering Your Portfolio With Alpha ...

  4. Active Trading

    The Linear Regression Of Time and Price

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  3. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  4. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  5. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center