- yt)2

V t=1 \


100 " CDC =- VD, where Dt = 1 if yt ■ yt > 0 else Dt = 0

yt is the actual change at time t. yt is the forecast change. t = 1 to t = T for the forecast period.

risk-adjusted measure of return, with higher ratios preferred to those that are lower, the maximum drawdown is a measure of downside risk and the average gain/loss ratio is a measure of overall gain, a value above one being preferred (Dunis and Jalilov, 2002; Fernandez-Rodriguez et al., 2000).

The application of these measures may be a better standard for determining the quality of the forecasts. After all, the financial gain from a given strategy depends on trading performance, not on forecast accuracy.

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