Marketing Papers

Document Type

Journal Article

Date of this Version

January 1995


Clements and Hendry (1993) proposed the Generalized Forecast Error Second Moment(GFESM) as an improvement to the Mean Square Error in comparing forecasting performance across data series. They based their conclusion on the fact that rankings based on GFESM remain unaltered if the series are linearly transformed. In this paper, we argue that this evaluation ignores other important criteria. Also, their conclusions were illustrated by a simulation study whose relationship to real data was not obvious. Thirdly, prior empirical studies show that the mean square error is an inappropriate measure to serve as a basis for comparison. This undermines the claims made for the GFESM.


Postprint version. Published in Journal of Forecasting, Volume 14, Issue 1, January 1995, pages 67-71.
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accuracy forecast evaluation, loss functions



Date Posted: 14 June 2007

This document has been peer reviewed.