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Investment: An A-Z Guide by Philip Ryland

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R

R&D

See RESEARCH AND DEVELOPMENT.

R-squared

A statistic that quantifies the proportion of VARIANCE in a STOCK’s return that can be explained by the variance in the return from the market of which the stock is a part. In CAPITAL MARKET THEORY, REGRESSION ANALYSIS is widely used to predict stock returns. However, such analysis can only predict returns on average and in the real world there is a wide dispersion around the average. So R2 measures the degree of fit between the market’s returns and the stock returns. The higher the R2, the more of the stock’s return is predicted by the market’s return.

Random walk

A branch of the EFFICIENT MARKET HYPOTHESIS that has probably generated more hot air than any other part of PORTFOLIO ...

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