What is the measure that represents the average of the absolute errors in a forecast?

What is the measure that represents the average of the absolute errors in a forecast?

• A. Mean Absolute Error
• B. Mean Squared Error
• C. Mean Absolute Percentage Error
• D. R-squared

Answer: (A)

The measure is Mean Absolute Error. It takes the absolute value of each forecast error (the difference between forecast and actual), so all errors are nonnegative, then averages those absolute errors across all observations. This gives the typical size of forecast errors in the same units as the data, without considering direction. It contrasts with approaches like mean squared error, which squares errors and punishes larger mistakes more, and with mean absolute percentage error, which expresses errors as percentages of the actuals. R-squared is about how well a model explains variation, not the average forecast error.

The measure is Mean Absolute Error. It takes the absolute value of each forecast error (the difference between forecast and actual), so all errors are nonnegative, then averages those absolute errors across all observations. This gives the typical size of forecast errors in the same units as the data, without considering direction. It contrasts with approaches like mean squared error, which squares errors and punishes larger mistakes more, and with mean absolute percentage error, which expresses errors as percentages of the actuals. R-squared is about how well a model explains variation, not the average forecast error.