Part 2. MM4XL Tools > 2. Analytical Tools > Business Formulas > 3. Forecast Errors > Forecast Errors

Business Formulas

Forecast Errors

Examination of an error in forecasting permits the forecaster to evaluate whether the technique accurately mirrors the pattern exhibited in the sample observations. An evaluation of the reliability of any technique requires the specification of criteria; however, there is no generally acceptable best measure. In fact, there are a number of measures for assessing forecast accuracy.

MM4XL software tool Business Formulas offers several different measures of forecast accuracy:

  • MSE, Mean Standard Error
  • MAD, Mean Average Deviation
  • RMSE, Root-Mean-Square Error
  • DW, Durbin-Watson Test
  • U, U-statistics
  • MAPE, Mean Average Percent Error
  • ME, Mean Error
The Correlation Coefficient (R) and its squared form (R2) are also often used as measures of forecast accuracy. They have not been added to the list of MM4XL software formulas because they are standard Excel functions (see CORREL() and RSQ()), although the squared correlation coefficient is computed in the Reliability & Accuracy Report of the MM4XL software tool Forecast Manager.
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