Question

Using the following data, determine the values of MAD and MSE. Which of these measurements of error seems to yield the best information about the forecasts?

Period	Value	Forecast
1	19.4	16.6
2	23.6	19.1
3	24.0	22.0
4	26.8	24.8
5	29.2	25.9
6	35.5	28.6

A) MAD=3.58, MSE=15.77

B) MAD=3.58, MSE=94.59

C) MAD=21.5, MSE=15.77

D) MAD=21.5, MSE=94.59

Answer 1

Solution

Period	Value (A)	Forecast (F)	Deviation (A-F)	Absolute deviation |A-F|
1	19.4	16.6	2.8	3.1
2	23.6	19.1	4.5	4
3	24	22	2	3
4	26.8	24.8	2	2
5	29.2	25.9	3.3	3.3
6	35.5	28.6	6.9	6.9

MAD = | A-F | / n

= 21.5 / 6

= 3.58

Period	Value (A)	Forecast (F)	A-F	(A-F)2
1	19.4	16.6	2.8	7.84
2	23.6	19.1	4.5	20.25
3	24	22	2	4
4	26.8	24.8	2	4
5	29.2	25.9	3.3	10.89
6	35.5	28.6	6.9	47.61

MSE = (A-F)²/ n

= 94.59

= 15.77

Option A