If f_t denotes the forecast of y_t+1 made at time t, then the forecast error is given by: A)e_t+1 = f_t/y_t+1. B)e_t+1 = y_t+1/f_t. C)e_t+1 = y_t+1 + f_t. D)e_t+1 = y_t+1 - f_t.

Question

Quizplus · Accepted Answer

The forecast error is the difference between the actual value of y at time t+1 and the forecast made at time t. Therefore, the correct formula for the forecast error is e = y(t+1) - f(t). Option D represents this formula correctly.

If Ft Denotes the Forecast of Yt+1 Made at Time

If F_t Denotes the Forecast of Y_t+1 Made at Time