What is the definition of R-squared?
- Posted on November 21, 2019
- Financial Terms
- By admin admin
R-squared is a statistical value representing the percentage of the movement in the price of an asset which can be explained by the movements of an underlying index. The value of R-squared can range from 0 to 100 (i.e. 100 means 100% of the asset movement is explained by the index, 0 meaning none of it is).
Higher values of R-squared mean that beta is more useful and should be considered. An asset with an extremely high R-squared and a low beta (<1) will provide higher risk-adjusted returns.
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