The R-cubed. Preliminary Thoughts [MARTIN C, J.M.]
José-Manuel Martin Coronado Chief Economist, EMECEP Consultoría www.emecep-consultoria.com Professor and Researcher, Instituto de Econometria de Lima, IEL, www.institutoeconometria.com In Econometrics, or let's say in the Theory and Practice of Linear Regression, R-squared is not something new, nor it's strange, since it comes directly from the Analysis of Variance (ANOVA) and the complement of the Sum of Squared of Residuals (SSR) minimized to through the Least Squares Estimator (LSE). However, since the beginning of regression statistics, it has always been subject to improvement (by one group) or invalidation (by other groups), in all cases because it's not a perfect indicator of goodness of fit, as if one really existed. The goal is clear, the "observed deterministic" part is more important in the model than the non-deterministic or "implicit deterministic" part. Sometimes the search of a good R-squared is abandoned thanks to consistency theory (CLT