A new metric of absolute percentage error for intermittent demand forecasts

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The mean absolute percentage error (MAPE) is one of the most widely used measures of forecast accuracy, due to its advantages of scale-independency and interpretability. However, MAPE has the significant disadvantage that it produces infinite or undefined values for zero or close-to-zero actual values. In order to address this issue in MAPE, we propose a new measure of forecast accuracy called the mean arctangent absolute percentage error (MAAPE). MAAPE has been developed through looking at MAPE from a different angle. In essence, MAAPE is a slope as an angle, while MAPE is a slope as a ratio, considering a triangle with adjacent and opposite sides that are equal to an actual value and the difference between the actual and forecast values, respectively. MAAPE inherently preserves the philosophy of MAPE, overcoming the problem of division by zero by using bounded influences for outliers in a fundamental manner through considering the ratio as an angle instead of a slope. The theoretical properties of MAAPE are investigated, and the practical advantages are demonstrated using both simulated and real-life data. (C) 2016 The Authors. Published by Elsevier B.V. on behalf of International Institute of Forecasters
Publisher
ELSEVIER SCIENCE BV
Issue Date
2016-07
Language
English
Article Type
Article
Keywords

ACCURACY; SERIES

Citation

INTERNATIONAL JOURNAL OF FORECASTING, v.32, no.3, pp.669 - 679

ISSN
0169-2070
DOI
10.1016/j.ijforecast.2015.12.003
URI
http://hdl.handle.net/10203/212257
Appears in Collection
IE-Journal Papers(저널논문)
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