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What is a prediction interval and why show a range instead of one number?
A prediction interval is a range expected to contain the actual outcome with a stated probability, such as 80 percent. Showing a range is more honest than a single figure because every forecast is uncertain, and decisions like stock levels or cash buffers depend on how wide that uncertainty is.
A single number invites false precision. If demand is forecast at 1,000 units with a likely range of 800 to 1,250, you would order differently than if the range were 950 to 1,050.
Intervals should be checked: if an 80 percent interval contains the actual result only 50 percent of the time in backtests, it is too narrow. Many simple methods understate uncertainty. Intervals normally widen the further ahead you forecast.
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