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    Tracking Signal

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    Mazhaic Maham
    The tracking signal is used to monitor forecasts and detect unexpected departures from actual outcomes. It compares cumulative forecast errors to the mean absolute deviation to produce a ratio, where a higher ratio indicates potential bias in the forecasting model. Another tracking signal model smooths observed errors and absolute errors over time to calculate a ratio, where a ratio greater than 0.51 suggests nonrandom errors. The tracking signal can also be used as a variable smoothing constant, adjusting the forecasting method based on prior model performance.

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    Tracking Signal

    Uploaded by

    Mazhaic Maham
    246 views1 page
    The tracking signal is used to monitor forecasts and detect unexpected departures from actual outcomes. It compares cumulative forecast errors to the mean absolute deviation to produce a ratio, where a higher ratio indicates potential bias in the forecasting model. Another tracking signal model smooths observed errors and absolute errors over time to calculate a ratio, where a ratio greater than 0.51 suggests nonrandom errors. The tracking signal can also be used as a variable smoothing constant, adjusting the forecasting method based on prior model performance.

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    The tracking signal is used to monitor forecasts and detect unexpected departures from actual outcomes. It compares cumulative forecast errors to the mean absolute deviation to produce a ratio, where a higher ratio indicates potential bias in the forecasting model. Another tracking signal model smooths observed errors and absolute errors over time to calculate a ratio, where a ratio greater than 0.51 suggests nonrandom errors. The tracking signal can also be used as a variable smoothing constant, adjusting the forecasting method based on prior model performance.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    246 views1 page

    Tracking Signal

    Uploaded by

    Mazhaic Maham
    The tracking signal is used to monitor forecasts and detect unexpected departures from actual outcomes. It compares cumulative forecast errors to the mean absolute deviation to produce a ratio, where a higher ratio indicates potential bias in the forecasting model. Another tracking signal model smooths observed errors and absolute errors over time to calculate a ratio, where a ratio greater than 0.51 suggests nonrandom errors. The tracking signal can also be used as a variable smoothing constant, adjusting the forecasting method based on prior model performance.

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    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    Tracking signal In statistics and management science, a tracking signal monitors any forecasts that have been made

    in comparison with actuals, and warns when there are unexpected departures of the outcomes from the forecasts. Forecasts can relates to sales, inventory, or anything pertaining to an organizations future demand. The tracking signal is a simple indicator that forecast bias is present in the forecast model. It is most often used when the validity of the forecasting model might be in doubt. Contents: 1 Definition 2 See also 3 Notes 4 References 5 External links Definition One form of tracking signal is the ratio of the cumulative sum of forecast errors (the deviations between the estimated forecasts and the actual values) to the Mean Absolute Deviation.[1] The formula for this tracking signal is: Tracking signal = (ft at) / MAD where at is the actual value of the quantity being forecast, and ft is the forecast. MAD is the Mean Absolute Deviation. The formula for the MAD is: MAD = |ft at| / n where n is the number of periods. Plugging this in, the entire formula for tracking signal is: Tracking signal = (ft at) / |ft at| / n Another proposed tracking signal was developed by Trigg (1964). In this model, et is the observed error in period t and |et| is the absolute value of the observed error. The smoothed values of the error and the absolute error are given by: Et = et + (1 )Et1 Mt = |et| + (1 )Mt1 Then the tracking signal is the ratio: Tt = |Et / Mt| If no significant bias is present in the forecast, then the Smoothed Error Et should be small compared to the smoothed Absolute Error Mt. Therefore, a large tracking signal value indicates a bias in the forecast. For example, with a of 0.1, a value of Tt greater than .51 indicates nonrandom errors. The tracking signal also can be used directly as a variable smoothing constant.[2] There have also been proposed methods for adjusting the smoothing constants used in forecasting methods based on some measure of prior performance of the forecasting model. One such approach is suggested by Trigg and Leach (1967), which requires the calculation of the tracking signal. The tracking signal is then used as the value of the smoothing constant for the next forecast. The idea is that when the tracking signal is large, it suggests that the time series has undergone a shift; a larger value of the smoothing constant should be more responsive to a sudden shift in the underlying signal.[3]

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