If a forecasting model produces forecast errors (residuals) that are negatively correlated, then we expect a negative residual to be followed by another negative residual to be followed by another negative residual and so forth.

Question

Quizplus · Accepted Answer

Negatively correlated residuals indicate that a negative residual is likely to be followed by a positive residual, and vice versa, suggesting a pattern of alternation rather than continuation.

If a Forecasting Model Produces Forecast Errors (Residuals) That Are