The Hot Air in R2 and Consistent Measures of Explained Variation

Anya M. McGuirk and Paul Driscoll

American Journal of Agricultural Economics, 1995, vol. 77, issue 2, 319-328

Abstract: The size of R2 and R̅2 are poor specification indicators since correctly specified models can have "low" R2 values and misspecified models often have "high" R2 values. Further, R2 and R̅2, as typically calculated, are found to be inconsistent measures of goodness of fit whenever the mean of the dependent variable is not stationary. Consistent estimation methods are proposed.

Date: 1995
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