Question

Discuss the basic differences between the mean absolute deviations and mean absolute percent error?

Short answer

Answer

Mean Absolute Deviation (MAD) is the average error in the forecasts, using absolute values. Mean Absolute Percent Error is the ratio of MAD and average demand.

Step-by-step solution

Mean absolute deviation

Mean absolute deviation is computed using the differences between the particular demand and the forecast demand without respect to signing. It equals the sum of absolute deviations divided by the number of data points or, stated in equation form,

$\mathrm{MAD}=\frac{{\displaystyle \underset{i=1}{\overset{n}{\sum \left(A_t-F_t\right)}}}}{n}$

Mean absolute percent error

Mean absolute percent error gauges the error relative to the average demand. MAPE is calculated by taking the MAD and dividing it by the average demand,

$\mathrm{MAPE}=\frac{\mathrm{MAD}}{\mathrm{Average}\mathrm{demand}}$

Step 3: Basic differences between the mean absolute deviation and mean absolute percent error

The mean absolute deviation (MAD) allows you to calculate the disparity between your predictions and the reality of booking while the mean absolute percent error (MAPE) allows you to put a percentage value to those calculations.