What is the probability associated with a single value? For e.g., if I say that the temperature tomorrow in Delhi will be 42 degree celcius then what will be the probability that the temperature will be exactly 42. Can the temperature not be 41.7 or 38.9 or anyother value. Hence it is always advisable to use a range when we predict the future values. For e.g., temperature tomorrow in Delhi will be within the range of 35 to 44 degree celcius. Now this makes sense, doesn’t it. Hence, always temperature is forecasted using minimum & maximum temperature for a specific day.
Extending the same example, can I provide an interval or range of predicted values. For e.g., can I say that temperature tomorrowwill be within the range of minus 40 to plus 100 degree celcius. Will this make sense, obviously ‘No’. Hence we need to always provide a range with certain confidence. Normally this confidence is set at 95% as an industry norm. We most often speak about 95% confidence interval. However, sometimes based on industry this value varies & a few of the commonly used confidence intervals are 90% or 99%. When we say 95% confidence interval, means, there is a 5% chance of we going wrong with the prediction.