If a model has R^2 equal to 0.75, what does this imply?

• A. The correlation between variables is 0.75
• B. 75 percent of the variance in the dependent variable is explained by the model.
• C. 75 percent probability of correct prediction
• D. The model is overfitting

Answer: (B)

R-squared shows how much of the variability in the outcome your model explains. With an R-squared of 0.75, the model accounts for 75% of the variance in the dependent variable, leaving about 25% unexplained by the predictors (noise or factors not included). It isn’t the correlation itself, and it doesn’t indicate probability of a correct prediction or automatically signal overfitting. In simple terms, a higher R-squared means the model captures more of what drives the observed values, and 0.75 means a strong, but not perfect, capture of that variability.