# Shared Flashcard Set

## Details

Forcasting
5
Management
02/06/2011

Term
 Bias
Definition
 The Bias is simply the arithmetic mean of the errors. We would, of course, like it to be zero. Apositive bias means that the model, on the average, forecasts low. Negative means the reverse.Bias = ∑  (Actual-Forecast) n
Term
 Mean Absolute Deviation
Definition
 MAD penalizes all errors equally, in direct proportion to their magnitude.You can interpret the MAD as meaning the amount by which the forecast model missed on theaverage.MAD = ∑  ABS(Actual-Forecast)   n
Term
 Mean Absolute Proportional Error (or Mean Absolute Percent Error).
Definition
 This is like MAD, butpenalizes error on the basis of what proportion of the actual value it is rather than its raw numericamount.MAPE = ∑  ABS(Actual-Forecast)                    Actual                 n
Term
 Mean Square Error
Definition
 MSE, as we usually call it, is very much like the simple variance you learned instatistics. It penalizes larger errors much more heavily than smaller ones.     MSE =∑(Actual-Forecast)2   n
Term
 Simple Exponential Smoothing
Definition
 The Simple Exponential Smoothing model is of the form Ft = ∂ª ´Yt-1 + (1-a)´Ft-1
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