The measure of forecast error where the average absolute error of each forecast is shown as a percentage of demand is
A) mean squared error (MSE).
B) mean absolute deviation (MAD).
C) mean absolute percentage error (MAPE).
D) bias.
E) the tracking signal.

Question

Quizplus · Accepted Answer

The measure described is the mean absolute percentage error (MAPE), which measures the average absolute difference between the actual demand and the forecasted demand as a percentage of the actual demand. Choice A, MSE, measures the squared difference between actual and forecasted demand, while Choice B, MAD, measures the average absolute difference between actual and forecasted demand. Choice D, bias, measures the average difference between actual and forecasted demand (positive or negative), and Choice E, the tracking signal, is used to detect whether the forecast is biased and trending in one direction.

The Measure of Forecast Error Where the Average Absolute Error