On the Selection of Error Measures for Comparisons Among Forecasting Methods

Journal of Forecasting , Vol. 14, pp. 67-71, 1995

5 Pages Posted: 7 Feb 2005 Last revised: 1 Jan 2012

See all articles by J. Scott Armstrong

J. Scott Armstrong

University of Pennsylvania - Marketing Department

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

Suggested Citation

Armstrong, J. Scott, On the Selection of Error Measures for Comparisons Among Forecasting Methods. Journal of Forecasting , Vol. 14, pp. 67-71, 1995. Available at SSRN: https://ssrn.com/abstract=662661

J. Scott Armstrong (Contact Author)

University of Pennsylvania - Marketing Department ( email )

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215-898-2534 (Fax)

HOME PAGE: http://marketing.wharton.upenn.edu/people/faculty/armstrong.cfm

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