Question

describes what percentage of the variation of the left-hand side variable can be explained by the variation of the right-hand side variable.

Multiple Choice

R-squared

alpha

beta

residual

Answer 1

Answer: R-Squared

R-squared is a statistical measure that represents the proportion of the variance for a dependent variable that's explained by an independent variable or variables in a regression model. R-squared explains to what extent the variance of one variable explains the variance of the second variable.

Alpha is the excess return on an investment relative to the return on a benchmark index. Beta is the measure of relative volatility, i.e., the beta of an investment is a measure of the risk arising from exposure to market movements as opposed to single variable. Residual can also be termed as a unexpected component where as alpha is expected component.