A Source of Constant Discussion Among Applied Econometricians Is the Degree

Essay

A source of constant discussion among applied econometricians is the degree to which measures of the overall fit of an estimated equation also measure the quality of that regression. To date, we have introduced something like four different measures of overall fit, but the two most used are $\mathrm { R } ^ { 2 }$ and $\overline { \mathrm { R } } ^ { 2 }$ .
(a) Carefully distinguish between $\mathrm { R } ^ { 2 }$ and $\overline { \mathrm { R } } ^ { 2 }$ .
(b) Of the two, which do you recommend typically using? Why?
(c) What drawbacks are there to the use of the measure you chose (as your answer to part (b) above) as the primary determinant of the overall quality of a regression?