Lesson 12: Measuring Forecast Error

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March 14, 2017 at 10:00 am  •  Posted in s17-busad360 by  •  0 Comments

Tue, Mar 14

Review:

Presentation:

  • Forecast Error
    • MAD – mean absolute deviation
      • MAD = ∑|Actual – Forecast|/(Number of Forecasts)
    • MSE – mean square error
      • MSE = ∑(Actual – Forecast)^2/(Number of Forecasts)
    • MAD easier to interpret than MSE
  • Example
    • Actual vs Forecast Selling Prices
    • Actual Forecast |Actual-Forecast| (Actual-Forecast)^2
      55 55 0 0
      27 50 23 527
      217 184 33 1,097
      153 149 4 19
      180 176 4 12
      145 123 22 477
      105 56 49 2,386
      210 225 15 225
      49 130 81 6,547
      83 104 21 461
      251 272 21 428
      145 166 21 460
      294 12,639
      24.5 1,053.3
      MAD MSE

Activity:

  • Calculate MAD for your Exam 2 regression model forecasts vs actual Sell Price.
  • Use a separate piece of paper and submit in-class today.

Assignment:

  • Calculate MAD and MSE for your Exam 2 regression model forecasts vs actual Sell Price
  • Use Google Sheets
  • Submit print copy in-class Thu, Mar 16

 

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