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Quantitative Analysis-Discussion (1)

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Q What is MAD and why is it important in the selection and use of forecasting models? How does it compare with MAPE and MSE? What are the differences between the three? Outside research is required. Remember to cite your sources.

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Measuring the error is an important factor in forecasting as it indicates the strength of the forecasting model. The MAD or the Mean Absolute Deviation is one such way to measure the error in a forecasting model. The error in forecasting refers t the value of the difference between the original value and the forecasted value. The MAD can be calculated by taking the average of the absolute value of the errors. The absolute value has been considered so that the positive and negative errors would not cancel each other.