In practice, either mad or mse would be employed to compute forecast errors. what factors might lead a manager to choose one

Comment (1) on “In practice, either mad or mse would be employed to compute forecast errors. what factors might lead a manager to choose one”

1. a.  Compute MAD for each set of forecasts. Given your results, which forecast appears to be more accurate?

   I used an excel spreadsheet (attached as MAD).    

   F1 seems to be more accurate.

   b.  Compute the MSE for each set of forecasts.

   I used an excel spreadsheet (attached as MSE).

   F2 seems to be more accurate.

   c.  In practice, either MAD or MSE would be employed to compute forecast errors. What factors might lead a manager to choose one rather than the other?

   Either one might already be in use, familiar to users, and have past values for comparison.

   If control charts are used, MSE would be natural; if tracking signals are used, MAD would be more natural.

   d.  Compute MAPE for each data set. Which forecast appears to be more accurate?

   I used an excel spreadsheet (attached as MAPE).

   F2 seems to be more accurate.

   Explanation:

   Period Demand F1 F2

   1 68 63 62

   2 75 66 61

   3 70 73 70

   4 74 65 71

   5 69 71 73

   6 72 69 73

   7 80 70 76

   8 78 72 80

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