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Forecasting Errors

This document discusses various methods for calculating forecast errors and evaluating the accuracy of forecasts. It defines a forecast error as the difference between the actual and predicted values. It also discusses calculating the mean absolute percentage error (MAPE) to measure forecast accuracy as a percentage. Finally, it provides an example of a major forecasting error from 1987, when a BBC forecaster dismissed concerns about an impending powerful storm that ultimately caused significant damage.

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Orxan Semedov
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55 views11 pages

Forecasting Errors

This document discusses various methods for calculating forecast errors and evaluating the accuracy of forecasts. It defines a forecast error as the difference between the actual and predicted values. It also discusses calculating the mean absolute percentage error (MAPE) to measure forecast accuracy as a percentage. Finally, it provides an example of a major forecasting error from 1987, when a BBC forecaster dismissed concerns about an impending powerful storm that ultimately caused significant damage.

Uploaded by

Orxan Semedov
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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AZERBAİJAN STATE OİL AND

INDUSTRY UNİVERSİTY

FACULTY BA
GROUP ZU-051
SUBJECT DECISION MAKING
TEACHER KONUL JABBAROVA
STUDENT FARID NAJAFLI
FORECASTİNG
ERRORS
In statistics, a forecast error is the
difference between the actual or real
and the predicted or forecast value
of a time series or any other
phenomenon of interest. Since the
forecast error is derived from the
same scale of data, comparisons
between the forecast errors of
different series can only be made
when the series are on the same
scale. In simple cases, a forecast is
compared with an outcome at a
single time-point and a summary of
forecast errors is constructed over a
collection of such time-points. Here
the forecast may be assessed using In other cases, a forecast may consist of
the difference or using a proportional predicted values over a number of lead-times;
error. By convention, the error is in this case an assessment of forecast error
defined using the value of the may need to consider more general ways of
outcome minus the value of the assessing the match between the time-
forecast. profiles of the forecast and the outcome.
If a main application of the forecast is to
predict when certain thresholds will be
crossed, one possible way of assessing the
forecast is to use the timing-error—the
difference in time between when the outcome
crosses the threshold and when the forecast
does so. When there is interest in the maximum
value being reached, assessment of forecasts
can be done using any of:

The difference in The difference between


The difference the peak value of the
the peak values in
of times of the outcome and the value
the forecast and forecast for that time
peaks
outcome point
CALCULATING WITH MAPE

The mean absolute
percentage error (MAPE) is
a measure of how accurate a
forecast system is. It
measures this accuracy as
a percentage, and can be
• n is the number of fitted points,
calculated as the average
• At is the actual value,
absolute percent error for
each time period minus • Ft is the forecast value.
actual values divided by • Σ is summation notation (the absolute value is
actual values. summed for every forecasted point in time).
Column D displays the absolute percent error
We will repeat this formula for each row:
and Column E shows the formula we used:
Calculate MAPE by simply finding the average of the values in column
D:
Average absolute deviation of the collected data set is the average
of absolute deviations from a centre point of the data set.
Abbreviated as MAD, Mean absolute deviation has four types of
deviations that are derived by central tendency, mean median
and mode and standard deviation. Mean absolute deviation is,
however, best used as it is more accurate and easy to use in real-
life situations.

• xi = Input data values


• x = Mean value for a
given set of data
• n = Number of data
values
To find MAD, you need to follow below steps:
 Calculate the mean for the given set of data.
 Find the difference between each value present in
the data set and the mean that gives you the
absolute value.
 Find the average of all the absolute values of the
difference between the data set and the mean that
gives the mean absolute deviation (MAD).
Example of
Forecasting errors

A few hours before the


Great Storm of 1987
broke, on 15 October
1987, he said during a
forecast: "Earlier on
today, apparently, a
woman rang the BBC
and said she heard The storm was the worst to hit
there was a hurricane South East England for three
on the way. Well, if centuries, causing record damage
you're watching, don't and killing 19 people.
worry, there isn't!".

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