Lesson 20: Measuring Forecast Error
November 7, 2024
Review:
- Election forecasting
- Next week
- Review for Exam 3 on Tue, Nov 12
- Exam 3 on Thu, Nov 14
Presentation:
- Election exercise: plot forecast vs actual
- Measurement of forecast error
- MAD – mean absolute deviation
- MAD = ∑|Actual – Forecast|/(Number of Forecasts)
- RMSE – root mean square error
- RMSE = √(∑(Actual – Forecast)^2/(Number of Forecasts))
- MAD – mean absolute deviation
- What can be done if the bivariate relationship is nonlinear?
- Curve fitting
- Use Trendline function in scatter plot
- Linear
- Polynomial
- Demonstrate
Activity:
- Fit polynomial curves
- Download interest rate spread data from the St. Louis Federal Reserve
- Fit a 2nd and 3rd order polynomial to the data
- Display the equation and the R^2 value
- Repeat with Corn Prices
- Add to your portfolio
