What does the standard deviations of errors function calculate?

The standard deviations of errors function is a statistical measurement that quantifies the amount of variation or dispersion in a set of forecast errors. It specifically analyzes how far the forecasted values deviate from the actual values, providing insights into the accuracy of the forecasts made.

When it is stated that it calculates the percentage error of a forecast, it refers to the statistical approach used to assess and express the forecasts' inaccuracies. The standard deviation helps in understanding the extent of the errors in a more comprehensive manner, providing context for how reliable the forecasts are over the evaluated period. A smaller standard deviation indicates that the errors (i.e., the differences between actual and forecasted values) are generally close to the mean, suggesting higher accuracy in forecasting.

This calculation plays a crucial role in evaluating forecasting performance as it allows forecasting teams to improve models and make more informed decisions based on the variability of forecast errors in relation to actual outcomes.