Fig. 2

Risk and Returns in Forecasting Performance This figure visualizes forecasts in the plot of risk and returns. The vertical axis is the the expected loss difference that represents the average forecasting performance relative to the benchmark. The horizontal axis is the expected squared loss difference as risk in forecasting performance. The benchmark forecast, by definition, is located at the origin. The proposed forecast \(f^{(a)}\) and the monitoring forecast \(f^{(m)}\) are also located in the plot according to their performance and risk metrics