What is R-Squared?

Patrick Curtis

Reviewed by

Patrick Curtis WSO Editorial Board

Expertise: Investment Banking | Private Equity

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.

Related Terms

Return to Finance Dictionary

Patrick Curtis

Patrick Curtis is a member of WSO Editorial Board which helps ensure the accuracy of content across top articles on Wall Street Oasis. He has experience in investment banking at Rothschild and private equity at Tailwind Capital along with an MBA from the Wharton School of Business. He is also the founder and current CEO of Wall Street Oasis. This content was originally created by member WallStreetOasis.com and has evolved with the help of our mentors.