Which of the following measures of forecast accuracy is susceptible to the problem of positive and negative forecast errors offsetting one another?
A)Mean absolute error
B)Mean forecast error
C)Mean squared error
D)Mean absolute percentage error

Question

Quizplus · Accepted Answer

The mean forecast error is susceptible to the problem of positive and negative forecast errors offsetting one another because the errors cancel each other out. For instance, if the forecast error for one period is +10 and for another period is -10, the mean forecast error would be zero, which doesn't indicate how accurately the model is forecasting. Mean absolute error and mean absolute percentage error are more appropriate measures of forecast accuracy as they consider the magnitude of the errors, while mean squared error takes into account both magnitude and direction of forecast errors.

Which of the Following Measures of Forecast Accuracy Is Susceptible