3

Question 1

Simple forecasting methods

Answer 1

mean forecast;
Na¨ıve forecast;
seasonal Na¨ıve forecast;
random walk with drift forecast.

Question 2

Properties of accuracy measures

Answer 2

MSE — easy to minimise because of easy calculation of derivative. Inconvenient to interpret results because has squared units.
RMSE — equivalent to MSE but easier error intepretation.
MAE — the most intuitive error interpretation, less sensitive to outliers, more difficult to minimize.
MAPE — scale independent, not suitable if values are approx. zero or both positive and negative, can be expressed as a part or percentage.