Forecasting & Forecast Evaluation Flashcards
What is the difference between static and dynamic forecasts?
Static is one-step ahead; dynamic uses forecasts to predict multiple steps ahead.
What is RMSE and why is it useful?
Root Mean Squared Error; it tells you the average forecast error in the same units as the dependent variable.
What does a low MSE indicate?
That forecast errors are small on average — the model is accurate.
What is the formula for forecast error
et=Yt− Y^t
What does MAPE show?
Forecast error as a percentage of the actual values.
What’s the difference between a forecast error and a residual?
Forecast error is from future/predicted values; residuals are from model fit within the sample.
In regression output, what indicates statistical significance?
A p-value less than the significance level (e.g., 0.05)
What does a high 𝑅2 mean in time series?
It may be misleading unless the series is stationary — high 𝑅2 can occur in spurious regressions.
