Question

If the errors produced by a forecasting method for 3 observations are +3, +3, and −3, then what is the mean squared error?

Answer 1

9

Explanation:

The mean squared error (MSE)of a set of observations can be calculated using the formula :

(1/n)Σ(Actual values - predicted values)^2

Where n = number of observations

Steps :

Error values of each observation (difference between actual and predicted values) is squared.

Step 2:

The squared values are summed

Step 3:

The summation is the divided by the number of observations

The difference between the actual and predicted values is known as the ERROR.

(1/n)Σ(ERROR)^2

n = 3

Error = +3, +3, - 3

MSE = (1/3)Σ[(3)^2 + (3)^2 + (-3)^2]

MSE = (1/3) × [9 + 9 + 9]

MSE = (1/3) × 27

MSE = 9