# Forecast Accuracy Measures

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See attached Excel data file.

For each forecast, set up columns and calculate:

Error

Squared error

Absolute error

Absolute % error

The numerator of Thiel"s U statistic

The denominator of Thiel"s U statistic

Calculate ME, MSE, RMSE, MAPE, and U.

Questions.

1/ The absolute percentage error for the data point 9/24/2008 returns #DIZ/0! Value. The appropriate action is...

a/ exclude 9/24/2008 entirely from data set

b/ Treat the reported error as a missing value when calculating the error statistics

c/ Replace the error by zero

d/ Replace the actual value of calls offered by a very small number e.g 1

e/ do nothing

2/ The following statement about the error statistics for the two variables is true.

a/ the calculated mean squared error for both models are too large to be interpreted

b/ Model 1 systematically over predicts number of calls

c/ Thiel's U statistic indicate that naïve forecasting will produce better forecast than either model 1 or 2

d/ Model 2 is far superior to Model 1 in terms of mean error

e/ Neither model has any substantial bias.

3/ The root mean squared error for models 1 and 2 respectively are

a/ 1018 and 1075

b/ 31 and 2

c/ .048 and .52

d/ 1036949 and 1156669

e/ .097 and .102

4/ The mean absolute percentage error for models 1 and 2 respectively are

a/ 1018 and 1075

b/ 0.097 and .102

c/ .48 and .52

d/ 1036949 and 1156669

e/ 31 and 2

5/ The error statistic indicate

a/ Naïve forecasting will produce better results than either model 1 or model 2

b/ Model 2 is better than model 1 based on RMSE and MAPE

c/ model 2 is better than model 1 because it has the lowest mean error

d/ model 1 is better than model 2 based on RMSE, MAPE, and Thiel's U statistic

e/ Both model 1 and model 2 provide reasonable forecast of calls offered based on MAPE.

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##### Solution Summary

This solution is comprised of detailed step-by-step calculations and explanation of various Forecast Accuracy Measures like Forecast Error, Absolute Error, Thiel's U Statistic, ME, MSE, RMSE, MAPE etc. in EXCEL. Comparison of these Forecast Techniques based on these Forecast Accuracy measures has also been shown.

###### Education

- MSc, Osmania University
- MSc, Indian Institute of Technology - Roorkee (I.I.T.-ROORKEE)
- BSc, Banaras Hindu University

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