While monitoring the forecast values based on simple moving

While monitoring the forecast values based on simple moving average method (averaging period = 3), the tracking signals are consistently coming out as large positive numbers (i.e., 4.0, 6.2, and 5.5). What should we do to the forecast model?

Solution

Tracking signal is used to monitor the quality of the forecast. It is computed as the ratio of the algebraic
sum of the forecast errors to the Mean absolute deviation: GEnerally, if tracking signal falls above 4 or below -4 , it is said that there is a bias in the forecasting method and therefore, forecasting mehod must be reviewed or changed.