The “Avoidability” of Forecast Error [PART 2]

August 8, 2013

While I’ve long advocated the use of Coefficient of Variation (CV) as a quick and dirty indicator of the forecastability of a time-series, its deficiencies are well recognized. It is true that any series with extremely low CV can be forecast quite accurately (using a moving average or simple exponential smoothing — or even a random walk!). But there are plenty of examples of series with high CV that are also forecastable with good accuracy. Thus:

Low CV => Easy to get accurate forecasts