Quarterly returns were forecasted for a mutual fund comprised of technology stocks.The forecast errors for the last six quarters are as follows: -0.47, 1.12, -0.85, 1.27, 0.07, and -0.05.The MAD based on these forecast errors is ________________________ .
A)0.18
B)0.22
C)0.64
D)0.77
E)0.98

Question

Quizplus · Accepted Answer

The Mean Absolute Deviation (MAD) is calculated by taking the absolute values of the forecast errors, summing them up, and then dividing by the number of observations. For the given forecast errors: |-0.47| + |1.12| + |-0.85| + |1.27| + |0.07| + |-0.05| = 0.47 + 1.12 + 0.85 + 1.27 + 0.07 + 0.05 = 3.83. Then, 3.83 divided by 6 (the number of observations) equals 0.6383, which rounds to 0.64.

Quarterly Returns Were Forecasted for a Mutual Fund Comprised of Technology