Question

A forecasting method has produced the following over the past five months. What is the mean absolute percent error? Month Actual Forecast 1 102 110 2 120 116 3 125 120 4 110 120 5 100 113

Answer 1

To calculate the mean absolute percentage error we have to first calculate the absolute percentage error for each period.

Absolute percentage error = (Absolute error/Actual value)100

Where, Absolute error = absolute value of error and error = Actual value - forecasted value

So using the above formula the errors and absolute errors for each period are

• For month 1 error = 102-110 = -8 and absolute error = 8
• For month 2 error = 120-116 = 4 and absolute error = 4
• For month 3 error = 125-120 = 5 and absolute error = 5
• For month 4 error = 110-120 = -10 and absolute error = 10
• For month 5 error = 100-113 = -13 and absolute error = 13

Now the absolute percentage error for each period are

• For month 1 = (8/102)100 = 7.84%
• For month 2 = (4/120)100 = 3.33%
• For month 3 = (5/125)100 = 4%
• For month 4 = (10/110)100 = 9.09%
• For month 5 = (13/100)100 = 13%

Mean absolute percentage error = Sum of Absolute percentage errors for each period/number of periods

= (7.84% + 3.33% + 4% + 9.09% + 13%)/5

= 37.26% / 5

= 7.452%