Tim gave his new intern the task of computing the tracking signal for a brand-new forecasting technique.The first month's data was available so the intern pounded away at his computer keyboard for the better part of an hour before finally running up to Tim brandishing a piece of paper with the answer.Which of these numbers should Tim not see for the first month's tracking signal result?
A)0
B)1
C)-1
D)2

Question

Quizplus · Accepted Answer

A tracking signal measures the accuracy of a forecasting technique by comparing actual values to forecasted values over time. It is calculated by dividing the cumulative error by the mean absolute deviation (MAD). The result should ideally be between -4 and 4. If the result is 0, it means the forecast is unbiased. If the result is positive, it means the forecast is consistently overestimating the actual values, and if it is negative, it means the forecast is consistently underestimating the actual values. A tracking signal of 2 in the first month would indicate that the forecasting technique is not very accurate, as it is overestimating by a significant amount. Therefore, Tim should not see choice D for the first month's tracking signal result.

Tim Gave His New Intern the Task of Computing the Tracking