Forecasting & Forecast Evaluation Flashcards
1
Q
What is the difference between static and dynamic forecasts?
A
Static is one-step ahead; dynamic uses forecasts to predict multiple steps ahead.
2
Q
What is RMSE and why is it useful?
A
Root Mean Squared Error; it tells you the average forecast error in the same units as the dependent variable.
3
Q
What does a low MSE indicate?
A
That forecast errors are small on average — the model is accurate.
4
Q
What is the formula for forecast error
A
et=Yt− Y^t
5
Q
What does MAPE show?
A
Forecast error as a percentage of the actual values.
6
Q
What’s the difference between a forecast error and a residual?
A
Forecast error is from future/predicted values; residuals are from model fit within the sample.
