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Is the MdAPE a Preferred Forecasting Accuracy Measurement over the MAD and MSE?: Evidence from Financial Data and Simulation

Louie Ren, Yong U. Glasure, Peter Ren

Abstract



Empirical results from the financial data and simulation in this study show that the MdAPE can only provide consistent forecast accuracies as the Mean Absolute Deviation (MAD) for independent normal time series with moderate c.v.’s for medium or long-term forecasts. But the MAD can clearly show the differences from forecasting methods of the different moving average length. Moreover, the current findings thus refute the assertions made by Goodwin and Lawton (1999) and Makridakis et al. (1982) that the MAPE or MdAPE is a preferred measurement of forecasting accuracy over the MAD and the MSE. In general, the MAD is still recommended to be used to analyze forecasting methods on random time series.

Keywords


Comparison of forecasting measures using financial data and simulation; Forecast evaluation, Forecast error measures.

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