Question

You are evaluating a forecast with errors of 10,−12,−8,16,−6, and 7 . Does your forecasting approach have any bias? If no, enter no. If yes, enter either "overforecasting" or "underforecasting" depending on which is correct.

Answer 1

The forecasting approach shows a slight over forecasting bias with an average error of 1.17. However, the mixed positive and negative errors suggest that there might not be a significant bias in the forecasting method.

Step-by-step explanation:

To determine if a forecasting approach has a bias, we look at the forecast errors. A forecasting bias exists when errors are consistently positive or consistently negative. In this case, the errors provided are 10, -12, -8, 16, -6, and 7. To assess bias, we calculate the average of these errors.

The sum of the errors is 10 + (-12) + (-8) + 16 + (-6) + 7 = 7.

The number of errors is 6, so the average error is 7 / 6 ≈ 1.17.

This average error is slightly above zero, suggesting a small over forecasting bias in the prediction method. However, since the errors are both positive and negative and the average error is quite close to zero, the forecasting method could be considered relatively unbiased.