Evaluate time series forecasts using the root mean

Reference no: EM133630267

Question 1: Your undergraduate friend has run a time series regression for unemployment on a set of regressors and is very excited to have gotten an R2 of 82% with some of the regressors significant at conventional levels. Your friend is excited about this result and keen on using it to forecast unemployment. Should you share your friends excitement? Discuss.

Question 2: We evaluate time series forecasts using the root mean squared error (RMSE) and the mean absolute error (MAE). Explain how you construct each of these measures.

Question 3: You want to compare a forecast for unemployment with a forecast for inflation. You think that using RMSE and MAE will tell you which forecast is performing better. Your friend notes that this runs into a problem. What is it?

Reference no: EM133630267

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