Forecast Intervals & Uncertainty Flashcards
What is a forecast interval?
A range around a forecast that reflects uncertainty in the prediction.
Why are forecast intervals wider than confidence intervals?
They account for both estimation error and future shocks.
What happens to forecast interval width as the horizon increases?
it gets wider due to accumulating uncertainty.
What is the general form of a 95% forecast interval?
Forecast ± 1.96 × forecast standard error.
Why do we care about forecast intervals?
They help us understand how reliable our forecasts are.
What does a structural break imply about a model’s parameters?
That the coefficients (intercept/slope) have changed over time.
What does a high MAPE mean in model evaluation?
That forecast errors are large relative to the size of actual observations.
What makes dynamic forecasts riskier than static ones?
Errors in earlier steps propagate into future predictions.
