Question: In a case study, if a linear regression model has a high R-squared value but poor predictive performance on new data, what might be the issue?

Options:

1. The model is too simple
2. The model is overfitting the training data
3. The model is underfitting the training data
4. The data is not linear

Correct Answer: The model is overfitting the training data

Solution:

A high R-squared value with poor performance on new data suggests that the model may be overfitting, capturing noise rather than the underlying trend.