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Unformatted text preview: implies MORE explanatory power. • Simultaneously, as more variables are added, “m” rises,” which causes adjusted R^2 to fall, which implies less explanatory. • Hence, if the SSE effect dominates the “m effect,” adjusted R^2 rises and the model has more explanatory power. o BUT you don’t want to just throw in extraneous variables into your model to increase adj. R^2 because economic theory prevents it. If you only have one model, there is NO need for adjusted R^2 just use regular R^2...
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- Spring '09
- Supply And Demand, Want, explanatory variables, additional explanatory variables, new explanatory variables