Question

Part A.

What is the difference between bias and random error in forecasting?

	Random errors refer to short term and bias to long term
	Random errors refer to long term and bias to short term
	Random errors are smaller than bias errors
	Bias errors are consistently in the same direction while random errors are not

Part B.

Which of the following is NOT true about forecasting?

	It is good practice to include a measure of expected forecast error with any forecast.
	In exponential smoothing, a lower smoothing constant will better forecast demand for a product experiencing high growth.
	It is good practice to use more than one forecasting model and then take a look at the results using common sense.
	A benefit of qualitative forecasts is that they take advantage of expert opinion.

Answer 1

1. Random errors refer to short term and bias to long term

Random errors arise due to random variation in the system which is short term in nature whereas bias is a systematic error which is a deviation that does not occur through chance alone and occurs due to an offset in measured value which is long term in nature.

2. Below statement is false about forecasting:

It is good practice to use more than one forecasting model and then take a look at the results using common sense.

This is because a particular forecatsing model needs to be selected for a particular forecast demand. It is not true that any forecasting model can be selected for any forecast work but it should be selected carefully after reading about it in detail. Only a particular model can be applied to particular forecast to be done.