In selecting a forecasting model, we should perform a residual analysis.

Question

Quizplus · Accepted Answer

Residual analysis helps us to evaluate the accuracy of a forecasting model by examining the difference between the actual and predicted values (i.e., residuals). This analysis can help us identify any patterns or trends in the residuals, which may suggest that the model is missing some important information, and we need to consider alternative models or adjust the current model accordingly. Hence, performing a residual analysis is an essential step in selecting an appropriate forecasting model.

In Selecting a Forecasting Model, We Should Perform a Residual