Aggregate forecasts are usually more accurate than disaggregate forecasts because
A) aggregate forecasts tend to have a larger standard deviation of error relative to the mean.
B) aggregate forecasts tend to have a smaller standard deviation of error relative to the mean.
C) disaggregate forecasts tend to have a smaller standard deviation of error relative to the mean.
D) disaggregate forecasts tend to have less standard deviation of error relative to the mean.
E) none of the above

Question

Quizplus · Accepted Answer

Aggregate forecasts combine information from multiple sources and are less susceptible to individual errors or biases. By averaging out the errors and biases, aggregate forecasts tend to have a smaller standard deviation of error relative to their mean. Disaggregate forecasts, on the other hand, are based on individual forecasts for smaller groups or sub-components, which may be subject to more variability and noise leading to a larger standard deviation of error relative to the mean.

Aggregate Forecasts Are Usually More Accurate Than Disaggregate Forecasts Because