R-Squared Interpretation - Quant Trader Interview Question
Difficulty: Medium
Category: Regression Analysis
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Topics: regression, r-squared, statistics, interpretation
Problem Description
You are analyzing a linear regression model where you are trying to explain the variance in daily returns of a stock (Y) using the daily returns of a market index (X). You obtain an $R^2$ value of 0.8.
What is the best interpretation of this $R^2$ value?
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