CRITERIA, TESTING (R2, T-STATISTIC, AND F-STATISTIC)

(Statistics) In criteria testing of the appropriateness of a econometric forecast model's structure (Specification), certain testing criteria are used most frequently. Specifically, the Coefficient of Determination, R2, is used as an overall measure of the "goodness of fit," the t-Statistic, is used as a measure of the appropriateness of individual explanatory variables, and the F-Statistic, is used as a measure of the appropriateness of the inclusion or exclusion of a set of explanatory variables simultaneously. Also see Model and Regression Analysis.