Distinguish between and adjusted- .

Question

09 Sep 2024

Answer :

Word Count : 322

In introductory econometrics, distinguishing between \( R^2 \) and adjusted \( R^2 \) is crucial for evaluating the goodness-of-fit of a regression model.

### \( R^2 \) (Coefficient of Determination)

\( R^2 \) measures the proportion of the variance in the dependent variable that is predictable from the independent variables. It ranges from 0 to 1, where a higher \( R^2 \) indicates a better fit of the model to the data. Specifically, \( R^2 \) is computed as:

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