Explanation:
R² = (350 − 130) / 350 = 0.63 = 63%
adjusted R² = 1 − [(30 − 1) / (30 − 6 − 1) × (1 − 0.63)] = 0.534 = 53.4%
The R² of 63% suggests that the six independent variables together explain 63% of the variation in monthly value stock returns.
(Book 2, Module 19.2, LO 19.c)
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Question 59
A quantitative analyst runs a regression of monthly value stock returns on six independent variables over 30 months. The total sum of squares for the regression is 350 and the sum of squared residuals is 130. Given this regression information, what are the coefficient of determination (R²) and adjusted R² measures, respectively?
A
37.1%; 53.4%.
B
37.1%; 79.0%.
C
46.6%; 37.1%.
D
63.0%; 53.4%.
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