Final answer:
The term used to describe the amount of systematic variation that can be explained among the total variation of stock returns is called the coefficient of determination, or R-squared.
Step-by-step explanation:
The term used to describe the amount of systematic variation that can be explained among the total variation of stock returns is called the coefficient of determination, or R-squared. R-squared measures the proportion of the total variation in stock returns that is explained by systematic factors, such as market movements or industry trends. It ranges from 0 to 1, where 0 indicates no systematic variation explained and 1 indicates all variation is explained. For example, if an R-squared value is 0.8, it means that 80% of the variation in stock returns can be explained by systematic factors.
In the context of stock returns, R-squared helps investors and analysts understand how much of the variation in returns is due to factors beyond their control. A high R-squared suggests that the stock's performance is closely tied to broader market or industry movements, while a low R-squared indicates that the stock's performance is driven by company-specific factors.
It is important to note that R-squared is not a measure of the stock's absolute return or the accuracy of predictions, but rather the extent to which systematic factors can explain the variation in returns.