Two different forecasting techniques (F1 and F2) were used to forecast demand for electricity consumption at Jindal school for previous 5 months. Actual demand and the two sets of forecast are as follows:
period( month index) actual demand ( million kWh) F1( million kWh) F2( million kWh)
1 68 66 68
2 69 72 76
3 72 69 72
4 70 73 70
5 75 68 68
a) compute Mean Absolute Deviation for each set of forecast. Given your result, which forecast appears to be more accurate? describe
b) compute Mean Squared Error for each set of forecast. Given your result, which forecast appears to be more accurate? describe
c) in practice, either MAD or MSE would be employed to compute forecast error. What might lead a manager to choose one rather than other?