Chapter 3 Forecasting process and forecasts evaluation
Forecasts ought to serve a specific purpose. They should not be made “just because” but be useful in the making of a decision. The decision then dictates the kind of forecast that should be made – its form and its time horizon(s). It also dictates how the forecast should be evaluated – a forecast only being as good as the quality of the decisions it enables.
When you understand how your system works and what sort of forecasts you should produce you can start an evaluation process; measuring the performance of different forecasting models / methods and selecting the most appropriate for your data. There are different ways to measure and compare the performance of models / methods In this chapter, we discuss the most common approaches.