ITEC 4030 Lecture Notes - Lecture 9: Bias Of An Estimator, Business Cycle, Operations Management
31 Aug 2017
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Document Summary
A tracking signal is a measurement of how well a forecast is predicting actual values. As forecasts are updated every week, month or quarter, the newly available demand data are compared to the forecast values. The tracking signal is computed as the cumulative error divided by the mean absolute deviation. Positive tracking signals indicate that demand is greater than forecast. Negative signals mean that demand is less than forecast. A good tracking signal that is, one with a low cumulative error has about as much positive error as it has negative error. In other words, small deviations are okay, but positive and negative errors should balance one another so that the tracking signal centers closely around zero. A consistent tendency for forecasts to be greater or less than the actual values (that is, for a high absolute cumulative error) is called a bias error.
