For Exercises 13.46 to 13.49, see pages 693–694; for 13.50, see page 699; and for 13.51 and 13.52, see pages 705–706.

Question 13.47

13.47 Comparing models for hires rate with MAD.

When comparing competing forecast methods, a primary concern is the relative accuracy of the methods. Ultimately, how well a forecasting method does is reflected in the residuals (“prediction errors”).

  1. One measure of forecasting accuracy is mean absolute deviation (MAD). As the name suggests, it is a measure of the average size of the prediction errors. For a given set of residuals (),

    where is the residual for period and is the number of available residuals. Compute MAD for the residuals from the 1-month, 2-month, 3-month, and 4-month moving-average models determined in Exercise 13.46, part (c).

  2. What moving-average span value corresponds with the smallest MAD?

mean absolute deviation (MAD)

13.47

(a) The MADs are: 1-month: 0.46769, 2-month: 0.37500, 3-month: 0.36138, 4-month: 0.34619. (b) The 3-month MAD is the smallest.

hires