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Math Help - forecasting problem

  1. #1
    Newbie
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    forecasting problem

    Generally while calculating forecasts the formula used is

    % error = ((Actual/Forecast) -1) * 100

    However while forecasting trends this could be misleading. In case a forecast is made for an increasing trend and the actual values start decreasing, even though the % error is small, the prediction is completely wrong.

    Is there any other method of calculating error or accuracy where an under-forecast or over-forecast could be suitably accounted for?

    P.S. the error should be calculated for each forecast/actual value and not for the entire data set.
    Last edited by knarayan21; July 28th 2011 at 04:10 AM.
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  2. #2
    Grand Panjandrum
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    Re: forecasting problem

    Quote Originally Posted by knarayan21 View Post
    Generally while calculating forecasts the formula used is

    % error = ((Actual/Forecast) -1) * 100

    However while forecasting trends this could be misleading. In case a forecast is made for an increasing trend and the actual values start decreasing, even though the % error is small, the prediction is completely wrong.

    Is there any other method of calculating error or accuracy where an under-forecast or over-forecast could be suitably accounted for?

    P.S. the error should be calculated for each forecast/actual value and not for the entire data set.
    Explain clearly what you want the "error" for.

    Also you percentage error formula look like it is the wrong way around, you would normally be interested in the forecast error as a percentage of the actual not the other way around.

    CB
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