Assume that a time-series forecast is generated for future demand and subsequently it is observed that the forecast method did not accurately predict the actual demand. Specifically, the forecast errors were found to be: Mean absolute percent error = 10%
Cumulative sum of forecast errors = 0
Which one of the statements concerning this forecast is True?
A) The forecast has no bias but has a positive standard deviation of errors.
B) The forecast has a positive bias and a standard deviation of errors equal to zero.
C) The forecast has no bias and has a standard deviation of errors equal to zero.
D) The forecast has a positive bias and a positive standard deviation of errors.

Question

Quizplus · Accepted Answer

The cumulative sum of forecast errors being 0 indicates that the forecast has no bias, as over- and under-estimations cancel each other out. However, a mean absolute percent error of 10% indicates that there is variability in the forecast errors, implying a positive standard deviation of errors.

Assume That a Time-Series Forecast Is Generated for Future Demand