How do I decide when to use MAPE, SMAPE and MASE for time series analysis on stock forecastingWhat are the shortcomings of the Mean Absolute Percentage Error (MAPE)?Adding up events in time series forecastingTime series forecasting accuracy measures: MAPE and MASETime-series forecasting (in C#)I want to do Time series forecasting on daily ATM transaction dataForecast accuracy metric that involves prediction intervalsWhat is frequency in time series in general and in my examples?How to interpret MASE for longer horizon forecasts?

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How do I decide when to use MAPE, SMAPE and MASE for time series analysis on stock forecasting


What are the shortcomings of the Mean Absolute Percentage Error (MAPE)?Adding up events in time series forecastingTime series forecasting accuracy measures: MAPE and MASETime-series forecasting (in C#)I want to do Time series forecasting on daily ATM transaction dataForecast accuracy metric that involves prediction intervalsWhat is frequency in time series in general and in my examples?How to interpret MASE for longer horizon forecasts?






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3












$begingroup$


My task is to forecast future 1 month stock required for retail store, at a daily basis. How do I decide whether
MAPE, SMAPE and MASE
is a good metrics for the scenario?



In my context, over-forecast is better than under-forecast.










share|cite|improve this question











$endgroup$




















    3












    $begingroup$


    My task is to forecast future 1 month stock required for retail store, at a daily basis. How do I decide whether
    MAPE, SMAPE and MASE
    is a good metrics for the scenario?



    In my context, over-forecast is better than under-forecast.










    share|cite|improve this question











    $endgroup$
















      3












      3








      3





      $begingroup$


      My task is to forecast future 1 month stock required for retail store, at a daily basis. How do I decide whether
      MAPE, SMAPE and MASE
      is a good metrics for the scenario?



      In my context, over-forecast is better than under-forecast.










      share|cite|improve this question











      $endgroup$




      My task is to forecast future 1 month stock required for retail store, at a daily basis. How do I decide whether
      MAPE, SMAPE and MASE
      is a good metrics for the scenario?



      In my context, over-forecast is better than under-forecast.







      time-series forecasting model-evaluation mape mase






      share|cite|improve this question















      share|cite|improve this question













      share|cite|improve this question




      share|cite|improve this question








      edited 8 hours ago









      Richard Hardy

      29.6k6 gold badges50 silver badges141 bronze badges




      29.6k6 gold badges50 silver badges141 bronze badges










      asked 9 hours ago









      william007william007

      2152 silver badges5 bronze badges




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          1 Answer
          1






          active

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          3














          $begingroup$

          You are forecasting for stock control, so you need to think about setting safety amounts. In my opinion, a quantile forecast is far more important in this situation than a forecast of some central tendency (which the accuracy KPIs you mention assess).



          You essentially have two or three possibilities.




          1. Directly forecast high quantiles of your unknown future distribution. There are more and more papers on this. I'll attach some below.



            Regarding your question, you can assess the quality of quantile forecasts using hinge loss functions, which are also used in quantile regression. Take a look at the papers by Ehm et al. (2016) and Gneiting (2011) below.




          2. Forecast some central tendency, e.g., the conditional expectation, plus higher moments as necessary, and combine these with an appropriate distributional assumption to obtain quantiles or safety amounts. For instance, you could forecast the conditional mean and the conditional variance and use a normal or negative-binomial distribution to set target service levels.



            In this case, you can use a forecast accuracy KPI that is consistent with the measure of central tendency you are forecasting for. For instance, if you try to forecast the conditional expectation, you can assess it using the MSE. Or you could forecast the conditional median and assess this using the MAE, wMAPE or MASE. See Kolassa (2019) on why this sounds so complicated. And you will still need to assess whether your forecasts of higher moments (e.g., the variance) are correct. Probably best to directly evaluate the quantiles this approach yields by the methods discussed above.




          3. Forecast full predictive densities, from which you can derive all quantiles you need. This is what I argue for in Kolassa (2016).



            You can evaluate predictive densities using proper scoring rules. See Kolassa (2016) for details and pointers to literature. The problem is that these are far less intuitive than the point forecast error measures discussed above.



          What are the shortcomings of the Mean Absolute Percentage Error (MAPE)? is likely helpful, and also contains more information. If you are forecasting for a single store, I suspect that the MAPE will often be undefined, because of zero demands (that you would need to divide by).



          References



          (sorry for not nicely formatting these)



          Ehm, W.; Gneiting, T.; Jordan, A. & Krüger, F.
          Of quantiles and expectiles: consistent scoring functions, Choquet representations and forecast rankings (with discussion).
          Journal of the Royal Statistical Society, Series B, 2016 , 78 , 505-562



          Gneiting, T.
          Quantiles as optimal point forecasts.
          International Journal of Forecasting, 2011 , 27 , 197-207



          Kolassa, S.
          Why the "best" point forecast depends on the error or accuracy measure.
          International Journal of Forecasting, 2019



          Kolassa, S.
          Evaluating Predictive Count Data Distributions in Retail Sales Forecasting.
          International Journal of Forecasting, 2016 , 32 , 788-803




          The following are more generally on quantile forecasting:



          Trapero, J. R.; Cardós, M. & Kourentzes, N.
          Quantile forecast optimal combination to enhance safety stock estimation.
          International Journal of Forecasting, 2019 , 35 , 239-250



          Bruzda, J.
          Quantile smoothing in supply chain and logistics forecasting.
          International Journal of Production Economics, 2019 , 208 , 122 - 139



          Kourentzes, N.; Trapero, J. R. & Barrow, D. K.
          Optimising forecasting models for inventory planning.
          Lancaster University Management School, Lancaster University Management School, 2019



          Ulrich, M.; Jahnke, H.; Langrock, R.; Pesch, R. & Senge, R.
          Distributional regression for demand forecasting -- a case study.
          2018



          Bruzda, J.
          Multistep quantile forecasts for supply chain and logistics operations: bootstrapping, the GARCH model and quantile regression based approaches.
          Central European Journal of Operations Research, 2018






          share|cite|improve this answer









          $endgroup$

















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            1 Answer
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            active

            oldest

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            active

            oldest

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            3














            $begingroup$

            You are forecasting for stock control, so you need to think about setting safety amounts. In my opinion, a quantile forecast is far more important in this situation than a forecast of some central tendency (which the accuracy KPIs you mention assess).



            You essentially have two or three possibilities.




            1. Directly forecast high quantiles of your unknown future distribution. There are more and more papers on this. I'll attach some below.



              Regarding your question, you can assess the quality of quantile forecasts using hinge loss functions, which are also used in quantile regression. Take a look at the papers by Ehm et al. (2016) and Gneiting (2011) below.




            2. Forecast some central tendency, e.g., the conditional expectation, plus higher moments as necessary, and combine these with an appropriate distributional assumption to obtain quantiles or safety amounts. For instance, you could forecast the conditional mean and the conditional variance and use a normal or negative-binomial distribution to set target service levels.



              In this case, you can use a forecast accuracy KPI that is consistent with the measure of central tendency you are forecasting for. For instance, if you try to forecast the conditional expectation, you can assess it using the MSE. Or you could forecast the conditional median and assess this using the MAE, wMAPE or MASE. See Kolassa (2019) on why this sounds so complicated. And you will still need to assess whether your forecasts of higher moments (e.g., the variance) are correct. Probably best to directly evaluate the quantiles this approach yields by the methods discussed above.




            3. Forecast full predictive densities, from which you can derive all quantiles you need. This is what I argue for in Kolassa (2016).



              You can evaluate predictive densities using proper scoring rules. See Kolassa (2016) for details and pointers to literature. The problem is that these are far less intuitive than the point forecast error measures discussed above.



            What are the shortcomings of the Mean Absolute Percentage Error (MAPE)? is likely helpful, and also contains more information. If you are forecasting for a single store, I suspect that the MAPE will often be undefined, because of zero demands (that you would need to divide by).



            References



            (sorry for not nicely formatting these)



            Ehm, W.; Gneiting, T.; Jordan, A. & Krüger, F.
            Of quantiles and expectiles: consistent scoring functions, Choquet representations and forecast rankings (with discussion).
            Journal of the Royal Statistical Society, Series B, 2016 , 78 , 505-562



            Gneiting, T.
            Quantiles as optimal point forecasts.
            International Journal of Forecasting, 2011 , 27 , 197-207



            Kolassa, S.
            Why the "best" point forecast depends on the error or accuracy measure.
            International Journal of Forecasting, 2019



            Kolassa, S.
            Evaluating Predictive Count Data Distributions in Retail Sales Forecasting.
            International Journal of Forecasting, 2016 , 32 , 788-803




            The following are more generally on quantile forecasting:



            Trapero, J. R.; Cardós, M. & Kourentzes, N.
            Quantile forecast optimal combination to enhance safety stock estimation.
            International Journal of Forecasting, 2019 , 35 , 239-250



            Bruzda, J.
            Quantile smoothing in supply chain and logistics forecasting.
            International Journal of Production Economics, 2019 , 208 , 122 - 139



            Kourentzes, N.; Trapero, J. R. & Barrow, D. K.
            Optimising forecasting models for inventory planning.
            Lancaster University Management School, Lancaster University Management School, 2019



            Ulrich, M.; Jahnke, H.; Langrock, R.; Pesch, R. & Senge, R.
            Distributional regression for demand forecasting -- a case study.
            2018



            Bruzda, J.
            Multistep quantile forecasts for supply chain and logistics operations: bootstrapping, the GARCH model and quantile regression based approaches.
            Central European Journal of Operations Research, 2018






            share|cite|improve this answer









            $endgroup$



















              3














              $begingroup$

              You are forecasting for stock control, so you need to think about setting safety amounts. In my opinion, a quantile forecast is far more important in this situation than a forecast of some central tendency (which the accuracy KPIs you mention assess).



              You essentially have two or three possibilities.




              1. Directly forecast high quantiles of your unknown future distribution. There are more and more papers on this. I'll attach some below.



                Regarding your question, you can assess the quality of quantile forecasts using hinge loss functions, which are also used in quantile regression. Take a look at the papers by Ehm et al. (2016) and Gneiting (2011) below.




              2. Forecast some central tendency, e.g., the conditional expectation, plus higher moments as necessary, and combine these with an appropriate distributional assumption to obtain quantiles or safety amounts. For instance, you could forecast the conditional mean and the conditional variance and use a normal or negative-binomial distribution to set target service levels.



                In this case, you can use a forecast accuracy KPI that is consistent with the measure of central tendency you are forecasting for. For instance, if you try to forecast the conditional expectation, you can assess it using the MSE. Or you could forecast the conditional median and assess this using the MAE, wMAPE or MASE. See Kolassa (2019) on why this sounds so complicated. And you will still need to assess whether your forecasts of higher moments (e.g., the variance) are correct. Probably best to directly evaluate the quantiles this approach yields by the methods discussed above.




              3. Forecast full predictive densities, from which you can derive all quantiles you need. This is what I argue for in Kolassa (2016).



                You can evaluate predictive densities using proper scoring rules. See Kolassa (2016) for details and pointers to literature. The problem is that these are far less intuitive than the point forecast error measures discussed above.



              What are the shortcomings of the Mean Absolute Percentage Error (MAPE)? is likely helpful, and also contains more information. If you are forecasting for a single store, I suspect that the MAPE will often be undefined, because of zero demands (that you would need to divide by).



              References



              (sorry for not nicely formatting these)



              Ehm, W.; Gneiting, T.; Jordan, A. & Krüger, F.
              Of quantiles and expectiles: consistent scoring functions, Choquet representations and forecast rankings (with discussion).
              Journal of the Royal Statistical Society, Series B, 2016 , 78 , 505-562



              Gneiting, T.
              Quantiles as optimal point forecasts.
              International Journal of Forecasting, 2011 , 27 , 197-207



              Kolassa, S.
              Why the "best" point forecast depends on the error or accuracy measure.
              International Journal of Forecasting, 2019



              Kolassa, S.
              Evaluating Predictive Count Data Distributions in Retail Sales Forecasting.
              International Journal of Forecasting, 2016 , 32 , 788-803




              The following are more generally on quantile forecasting:



              Trapero, J. R.; Cardós, M. & Kourentzes, N.
              Quantile forecast optimal combination to enhance safety stock estimation.
              International Journal of Forecasting, 2019 , 35 , 239-250



              Bruzda, J.
              Quantile smoothing in supply chain and logistics forecasting.
              International Journal of Production Economics, 2019 , 208 , 122 - 139



              Kourentzes, N.; Trapero, J. R. & Barrow, D. K.
              Optimising forecasting models for inventory planning.
              Lancaster University Management School, Lancaster University Management School, 2019



              Ulrich, M.; Jahnke, H.; Langrock, R.; Pesch, R. & Senge, R.
              Distributional regression for demand forecasting -- a case study.
              2018



              Bruzda, J.
              Multistep quantile forecasts for supply chain and logistics operations: bootstrapping, the GARCH model and quantile regression based approaches.
              Central European Journal of Operations Research, 2018






              share|cite|improve this answer









              $endgroup$

















                3














                3










                3







                $begingroup$

                You are forecasting for stock control, so you need to think about setting safety amounts. In my opinion, a quantile forecast is far more important in this situation than a forecast of some central tendency (which the accuracy KPIs you mention assess).



                You essentially have two or three possibilities.




                1. Directly forecast high quantiles of your unknown future distribution. There are more and more papers on this. I'll attach some below.



                  Regarding your question, you can assess the quality of quantile forecasts using hinge loss functions, which are also used in quantile regression. Take a look at the papers by Ehm et al. (2016) and Gneiting (2011) below.




                2. Forecast some central tendency, e.g., the conditional expectation, plus higher moments as necessary, and combine these with an appropriate distributional assumption to obtain quantiles or safety amounts. For instance, you could forecast the conditional mean and the conditional variance and use a normal or negative-binomial distribution to set target service levels.



                  In this case, you can use a forecast accuracy KPI that is consistent with the measure of central tendency you are forecasting for. For instance, if you try to forecast the conditional expectation, you can assess it using the MSE. Or you could forecast the conditional median and assess this using the MAE, wMAPE or MASE. See Kolassa (2019) on why this sounds so complicated. And you will still need to assess whether your forecasts of higher moments (e.g., the variance) are correct. Probably best to directly evaluate the quantiles this approach yields by the methods discussed above.




                3. Forecast full predictive densities, from which you can derive all quantiles you need. This is what I argue for in Kolassa (2016).



                  You can evaluate predictive densities using proper scoring rules. See Kolassa (2016) for details and pointers to literature. The problem is that these are far less intuitive than the point forecast error measures discussed above.



                What are the shortcomings of the Mean Absolute Percentage Error (MAPE)? is likely helpful, and also contains more information. If you are forecasting for a single store, I suspect that the MAPE will often be undefined, because of zero demands (that you would need to divide by).



                References



                (sorry for not nicely formatting these)



                Ehm, W.; Gneiting, T.; Jordan, A. & Krüger, F.
                Of quantiles and expectiles: consistent scoring functions, Choquet representations and forecast rankings (with discussion).
                Journal of the Royal Statistical Society, Series B, 2016 , 78 , 505-562



                Gneiting, T.
                Quantiles as optimal point forecasts.
                International Journal of Forecasting, 2011 , 27 , 197-207



                Kolassa, S.
                Why the "best" point forecast depends on the error or accuracy measure.
                International Journal of Forecasting, 2019



                Kolassa, S.
                Evaluating Predictive Count Data Distributions in Retail Sales Forecasting.
                International Journal of Forecasting, 2016 , 32 , 788-803




                The following are more generally on quantile forecasting:



                Trapero, J. R.; Cardós, M. & Kourentzes, N.
                Quantile forecast optimal combination to enhance safety stock estimation.
                International Journal of Forecasting, 2019 , 35 , 239-250



                Bruzda, J.
                Quantile smoothing in supply chain and logistics forecasting.
                International Journal of Production Economics, 2019 , 208 , 122 - 139



                Kourentzes, N.; Trapero, J. R. & Barrow, D. K.
                Optimising forecasting models for inventory planning.
                Lancaster University Management School, Lancaster University Management School, 2019



                Ulrich, M.; Jahnke, H.; Langrock, R.; Pesch, R. & Senge, R.
                Distributional regression for demand forecasting -- a case study.
                2018



                Bruzda, J.
                Multistep quantile forecasts for supply chain and logistics operations: bootstrapping, the GARCH model and quantile regression based approaches.
                Central European Journal of Operations Research, 2018






                share|cite|improve this answer









                $endgroup$



                You are forecasting for stock control, so you need to think about setting safety amounts. In my opinion, a quantile forecast is far more important in this situation than a forecast of some central tendency (which the accuracy KPIs you mention assess).



                You essentially have two or three possibilities.




                1. Directly forecast high quantiles of your unknown future distribution. There are more and more papers on this. I'll attach some below.



                  Regarding your question, you can assess the quality of quantile forecasts using hinge loss functions, which are also used in quantile regression. Take a look at the papers by Ehm et al. (2016) and Gneiting (2011) below.




                2. Forecast some central tendency, e.g., the conditional expectation, plus higher moments as necessary, and combine these with an appropriate distributional assumption to obtain quantiles or safety amounts. For instance, you could forecast the conditional mean and the conditional variance and use a normal or negative-binomial distribution to set target service levels.



                  In this case, you can use a forecast accuracy KPI that is consistent with the measure of central tendency you are forecasting for. For instance, if you try to forecast the conditional expectation, you can assess it using the MSE. Or you could forecast the conditional median and assess this using the MAE, wMAPE or MASE. See Kolassa (2019) on why this sounds so complicated. And you will still need to assess whether your forecasts of higher moments (e.g., the variance) are correct. Probably best to directly evaluate the quantiles this approach yields by the methods discussed above.




                3. Forecast full predictive densities, from which you can derive all quantiles you need. This is what I argue for in Kolassa (2016).



                  You can evaluate predictive densities using proper scoring rules. See Kolassa (2016) for details and pointers to literature. The problem is that these are far less intuitive than the point forecast error measures discussed above.



                What are the shortcomings of the Mean Absolute Percentage Error (MAPE)? is likely helpful, and also contains more information. If you are forecasting for a single store, I suspect that the MAPE will often be undefined, because of zero demands (that you would need to divide by).



                References



                (sorry for not nicely formatting these)



                Ehm, W.; Gneiting, T.; Jordan, A. & Krüger, F.
                Of quantiles and expectiles: consistent scoring functions, Choquet representations and forecast rankings (with discussion).
                Journal of the Royal Statistical Society, Series B, 2016 , 78 , 505-562



                Gneiting, T.
                Quantiles as optimal point forecasts.
                International Journal of Forecasting, 2011 , 27 , 197-207



                Kolassa, S.
                Why the "best" point forecast depends on the error or accuracy measure.
                International Journal of Forecasting, 2019



                Kolassa, S.
                Evaluating Predictive Count Data Distributions in Retail Sales Forecasting.
                International Journal of Forecasting, 2016 , 32 , 788-803




                The following are more generally on quantile forecasting:



                Trapero, J. R.; Cardós, M. & Kourentzes, N.
                Quantile forecast optimal combination to enhance safety stock estimation.
                International Journal of Forecasting, 2019 , 35 , 239-250



                Bruzda, J.
                Quantile smoothing in supply chain and logistics forecasting.
                International Journal of Production Economics, 2019 , 208 , 122 - 139



                Kourentzes, N.; Trapero, J. R. & Barrow, D. K.
                Optimising forecasting models for inventory planning.
                Lancaster University Management School, Lancaster University Management School, 2019



                Ulrich, M.; Jahnke, H.; Langrock, R.; Pesch, R. & Senge, R.
                Distributional regression for demand forecasting -- a case study.
                2018



                Bruzda, J.
                Multistep quantile forecasts for supply chain and logistics operations: bootstrapping, the GARCH model and quantile regression based approaches.
                Central European Journal of Operations Research, 2018







                share|cite|improve this answer












                share|cite|improve this answer



                share|cite|improve this answer










                answered 8 hours ago









                Stephan KolassaStephan Kolassa

                55.5k10 gold badges108 silver badges205 bronze badges




                55.5k10 gold badges108 silver badges205 bronze badges































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