Low R-Square Value: Is this a problem?

[chelle anny]

Hi there! I am new here and eager to learn

I am currently doing an OLS regression model looking at how Emotions affects Risk Aversion. My R squared value is only 0.08 and I am rather worried. Is this a bad thing? I have tried to look at other possible predictors and restructure my model but I am currently still stuck on such a low R2 value. It has been days but perhaps because I am new and unfamiliar to this.

My regression model currently consists of Risk, Emotion(ex: Happy), Age, Net Income, Net Income Squared, Gender Dummy, Unemployment Dummy, Marriage Dummy, Child Dummy, Present Life Satisfaction, Future Life Satisfaction, NativeDummy, SelfEmployedDummy, Optimism, Years of Education, Level of Personal Finance Concern, Level of Personal Health Concern, InsuranceDummy(Public vs Private)

Please advise. I would love to learn!

[Carlo Lazzaro]

Chelle Anny:
please report what you typed and what Stata gave you back ( as per FAQ). Thanks.

[Felix Bittmann]

R2 should probably always judged in comparison to related models, like from earlier publications. If your model is significantly worse this might be concerning. However, if other models give similar values it might be due to the theoretical framework and how well you can measure your constructs. Technically, you can still test causal hypotheses with a low R2 value but if you are concerned it might be important to give detail information about your data and analyses, as Carlo pointed out.