What Does R² Measure

question 21

Multiple Choice

What does r² measure

• A) The proportion of variation in one variable that is explained by the other
• B) The proportion of error variation
• C) The proportion of variation in Y related to the variation of the categories of X
• D) The proportion of variation in Y due to the variation within each of the categories of X
• E) The significance of the relationship between X and Y

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Definitions:

Economy

The large system that encompasses all production, exchange, distribution, and consumption of goods and services within a certain area. It involves activities and interactions among individuals, businesses, and governments.

Minimum-Variance Portfolio

A portfolio constructed to achieve the lowest possible risk (variance) for a given level of expected return, optimizing the risk-return tradeoff.

Expected Return

A financial term referring to the average amount of profit or loss an investment is predicted to generate based on historical data.

Rate of Return

The positive or negative change in an investment's worth, calculated as a percentage of its original cost.