Regression Model Fit
Free CFA Level II lesson in Quantitative Methods. 13 min read, ~1,979 words.
R-squared never decreases when you add a variable; it rewards complexity, not quality, so it is unreliable for comparing models of different sizes. Adjusted R-squared penalizes each added variable and a useless one lowers it; use it to compare models of different sizes (but only when the dependent variable matches)...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Check Your Understanding
- Exam Shortcuts
Learning objectives
- regression model fit
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