Consider the actual and forecast values contained in the table. At which observation is the tracking signal at its maximum value?
A)Observation #5
B)Observation #7
C)Observation #4
D)Observation #6

Question

Consider the actual and forecast values contained in the table.  At which observation is the tracking signal at its maximum value?
A)Observation #5 
B)Observation #7 
C)Observation #4 
D)Observation #6

Quizplus · Accepted Answer

To calculate the tracking signal at each observation, we need to first calculate the cumulative sum of the forecast errors up to that observation.

For example, at observation #1, the forecast error is -2. The cumulative sum of forecast errors up to that point is also -2.

We then calculate the tracking signal as the cumulative sum of forecast errors divided by the MAD.

At observation #1, the tracking signal is -2/1 = -2.

Similarly, at observation #2, the forecast error is -1, the cumulative sum of forecast errors up to that point is -3 (-2+-1), and the tracking signal is -3/1.414 = -2.12.

We can calculate the tracking signal for each observation in the table and find that it is maximum at observation #4, where it is 4.4.

Therefore, the correct answer is C, Observation #4.

Consider the Actual and Forecast Values Contained in the Table