A note on upper bounds for forecast-value-added relative to naive forecasts

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Abstract

In Forecast Value Added (FVA) analysis the accuracy of relatively sophisticated forecasting methods is compared to that of naïve 1 forecasts to see if the extra costs and effort of implementing them is justified. In this note we derive a ratio that indicates the upper bound of a forecasting method's accuracy relative to naïve 1 forecasts when the mean squared error is used to measure one-period-ahead accuracy. The ratio is applicable when a series is stationary or when its first differences are
Original languageEnglish
Pages (from-to)1082-1084
JournalJournal of the Operational Research Society
Volume68
Issue number9
Early online date27 Mar 2017
DOIs
Publication statusPublished - Sep 2017

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