Correspondence On the Selection of Error Measures for Comparisons Among Forecasting Methods

J. Armstrong and Robert Fildes
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Robert Fildes: The Management School - Lancaster University - UK

General Economics and Teaching from University Library of Munich, Germany

Abstract: Clements and Hendry (1993) proposed the Generalized Forecast Error Second Moment (GFESM) as an improvement to the Mean Square Error in comparing forecasting performance across data series. They based their conclusion on the fact that rankings based on GFESM remain unaltered if the series are linearly transformed. In this paper, we argue that this evaluation ignores other important criteria. Also, their conclusions were illustrated by a simulation study whose relationship to real data was not obvious. Thirdly, prior empirical studies show that the mean square error is an inappropriate measure to serve as a basis for comparison. This undermines the claims made for the GFESM.

Keywords: Accuracy; Forecast; evaluation; Loss; functions (search for similar items in EconPapers)
JEL-codes: A (search for similar items in EconPapers)
Pages: 4 pages
Date: 2004-12-06
New Economics Papers: this item is included in nep-ets
Note: Type of Document - pdf; pages: 4
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpgt:0412002

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