What does adjusted R-squared account for that R-squared does not?
Correct Answer
A) The number of predictors used in the model
Why this is correct: Adjusted R-squared accounts for the number of predictors used in the model. It penalizes the model for adding variables that don't contribute meaningful explanatory power, providing a better measure of model quality when comparing models with different numbers of predictors. Why the other choices are wrong: Adjusted R-squared does not account for the dollar magnitude of the sale prices used. It does not account for the geographic spread of the sales sampled. It also does not account for the time elapsed since the earliest sale. Exam tip: When comparing regression models, use adjusted R-squared, not regular R-squared, to account for model complexity and avoid overfitting.
Why This Is the Correct Answer
Why this is correct: Adjusted R-squared accounts for the number of predictors used in the model. It penalizes the model for adding variables that don't contribute meaningful explanatory power, providing a better measure of model quality when comparing models with different numbers of predictors. Why the other choices are wrong: Adjusted R-squared does not account for the dollar magnitude of the sale prices used. It does not account for the geographic spread of the sales sampled. It also does not account for the time elapsed since the earliest sale. Exam tip: When comparing regression models, use adjusted R-squared, not regular R-squared, to account for model complexity and avoid overfitting.
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