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The forecast-error cancellation trap
A zero mean signed error can hide a miss in every period when opposite errors cancel.
| Period | Actual outcome | Forecast | Signed error | Absolute error |
|---|---|---|---|---|
| 1 | 100 | 80 | -20 | 20 |
| 2 | 100 | 120 | +20 | 20 |
| 3 | 100 | 80 | -20 | 20 |
| 4 | 100 | 120 | +20 | 20 |
| Mean | 100 | 100 | 0 | 20 |
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Reference & Evidence
Source: Author's synthetic example. Values are illustrative and do not describe an observed forecast set.