Asked by Fazena Jaikaran on Jul 25, 2024
Verified
A forecasting method has produced the following over the past five months. What is the mean absolute deviation? Actual Forecast Error ∣ Error ∣1012−22811−331091166009633\begin{array} { | c | c | c | c | } \hline \text { Actual } & \text { Forecast } & \text { Error } & \mid \text { Error } \mid \\\hline 10 & 12 & - 2 & 2 \\\hline 8 & 11 & - 3 & 3 \\\hline 10 & 9 & 1 & 1 \\\hline 6 & 6 & 0 & 0 \\\hline 9 & 6 & 3 & 3 \\\hline\end{array} Actual 1081069 Forecast 1211966 Error −2−3103∣ Error ∣23103
A) -0.2
B) -1.0
C) 0.0
D) 1.8
E) 9.0
Mean Absolute Deviation
A measure of dispersion in a data set, calculated as the average of the absolute differences between each value and the mean.
Forecast
A prediction or estimate of future events or trends, particularly in weather, economics, or business.
Error
A mistake in coding, logic, calculation, or the understanding of a system that leads to unexpected and usually undesirable outcomes.
- Gain an understanding of the theory and calculation process of Mean Absolute Deviation (MAD) as applied in forecasting activities.
Verified Answer
NS
Nemanja SavicJul 29, 2024
Final Answer :
D
Explanation :
The mean absolute deviation (MAD) is calculated by summing the absolute errors and dividing by the number of observations. Here, 2+3+1+0+3=92 + 3 + 1 + 0 + 3 = 92+3+1+0+3=9 , and dividing by 5 (the number of observations) gives 9/5=1.89 / 5 = 1.89/5=1.8 .
Learning Objectives
- Gain an understanding of the theory and calculation process of Mean Absolute Deviation (MAD) as applied in forecasting activities.