Determining Forecast Accuracy
It is difficult to determine the accuracy of any forecast, as it represents an attempt to predict future events, which is always challenging. To help improve and test forecast accuracy researchers use many different checking methods. A simple checking method involves the use of several different forecasting methods and comparing the results to see if they are more or less equal. Another method can involve statistically calculating the errors in the forecasting calculation and expressing them in terms of the root mean squared error, thereby providing an indication of the overall error in the method. A sensitivity analysis can also be useful, as it determines what will happen if some of the original data upon which the forecast was developed turned out to be wrong. Determining forecast accuracy, like forecasting itself, can never be performed with certainty and so it is advisable to ensure that input data is measured and obtained as accurately as possible, the most appropriate forecasting methods are selected, and the forecasting process is conducted as rigorously as possible.
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