goodness of fit

noun phrase

Definition of goodness of fit 

: the conformity between an experimental result and theoretical expectation or between data and an approximating curve

First Known Use of goodness of fit

1895, in the meaning defined above

Keep scrolling for more

Learn More about goodness of fit

Share goodness of fit

Statistics for goodness of fit

Look-up Popularity

Time Traveler for goodness of fit

The first known use of goodness of fit was in 1895

See more words from the same year

Keep scrolling for more

More Definitions for goodness of fit

goodness of fit

Financial Definition of goodness of fit

What It Is

Goodness of fit is a statistical term referring to how far apart the expected values of a financial model are from the actual values.

How It Works

Goodness of fit is a component of regression analysis, which is a statistical method used in finance and a variety of other fields to make predictions based on observed values. In other words, it is a measure of how correlated a group of actual observations are to a model's predictions.

In the following examples, the blue dots represent actual observations. The black lines represent a regression line, which is represented by the formula in the top right-hand corner of each chart. This formula is what analysts use to predict future values based on the behavior of the actual observations.

As you can see, this regression line has a high goodness of fit as represented by a high R2 value of 79%:

goodness of fit chart example

This next chart is an example of low goodness of fit. Here, the formula for the regression line was virtually unable to come up with the observed values. Goodness of fit, as represented by R2, is only 0.38%:

goodness of fit chart example

Why It Matters

Goodness of fit isn't just a statistical measure, it's a confidence measure. This is because when you've come up with a formula that accounts for most of the variations in a group of, say, price observations, you've also come up with a formula that can be a very reliable predictor of what prices will be in the future.

Source: Investing Answers

More from Merriam-Webster on goodness of fit

Rhyming Dictionary: Words that rhyme with goodness of fit

Comments on goodness of fit

What made you want to look up goodness of fit? Please tell us where you read or heard it (including the quote, if possible).

WORD OF THE DAY

a knickknack or trinket

Get Word of the Day daily email!

Test Your Vocabulary

Find the Cousins

  • a-large-tree-with-many-branches
  • Which pair shares a common word ancestor?
Spell It

Can you spell these 10 commonly misspelled words?

TAKE THE QUIZ
Word Winder's CrossWinder

Test Your Knowledge - and learn some interesting things along the way.

TAKE THE QUIZ

Love words? Need even more definitions?

Subscribe to America's largest dictionary and get thousands more definitions and advanced search—ad free!