IDEAS home Printed from https://ideas.repec.org/a/for/ijafaa/y2011i21p10-15.html
   My bibliography  Save this article

Accuracy versus Profitability

Author

Listed:
  • Roy Batchelor

Abstract

In a perfect world, forecast accuracy would be a reliable guide to the monetary value of the forecast; more accurate forecasts would be more profitable. But who lives in a perfect world? In real life, accuracy and monetary value do not necessarily correspond and, as Roy shows, can move in opposite directions. His examples reveal disconnections between accuracy and profitability among financial forecasters and how the same might occur among sales forecasters. To better explain this situation, Roy distinguishes between (a) the small movements in a target variable that occur ordinarily, and (b) the large changes that occur only occasionally. His point is similar to that made by Wil Gorr’s accompanying article in this issue on forecasting exceptional demands (p. 22): not only might we need different models to forecast exceptional vs. ordinary demand, but also different forecast-accuracy metrics. This clearly is a lesson worth attending to. Demand forecasters interested in devising appropriate forecasting performance metrics should also read Paul Goodwin’s Hot New Research column “Taking Stock: Assessing the True Cost of Forecast Errors,” in Foresight’s Fall 2009 issue. Copyright International Institute of Forecasters, 2011

Suggested Citation

  • Roy Batchelor, 2011. "Accuracy versus Profitability," Foresight: The International Journal of Applied Forecasting, International Institute of Forecasters, vol. 0(21), pages 10-15, File-URL:.
  • Handle: RePEc:for:ijafaa:y:2011:i:21:p:10-15
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rapach, David & Zhou, Guofu, 2013. "Forecasting Stock Returns," Handbook of Economic Forecasting, Elsevier.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:for:ijafaa:y:2011:i:21:p:10-15. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Pam Stroud). General contact details of provider: http://edirc.repec.org/data/iiforea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.