In selecting an appropriate forecasting model, the following approach is suggested.
A) Perform a residual analysis.
B) Measure the size of the forecasting error.
C) Use the principle of parsimony.
D) All of the above.

Question

Quizplus · Accepted Answer

Performing a residual analysis helps to check if the assumptions of the selected model are met or if the residual errors exhibit any patterns. Measuring the size of the forecasting error helps to determine the accuracy of the model. Using the principle of parsimony means selecting the simplest model that adequately fits the data. Therefore, all of the above factors should be considered when selecting an appropriate forecasting model.

In Selecting an Appropriate Forecasting Model, the Following Approach Is