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I’m trying to evaluate directional forecast results in a contingency table. I´m not quite sure exactly what kind of hypothesis I should set up to decide whether the forecaster is better than just a random guess or better than another forecaster, or how I should interpret my results.

In my contingency table I have three directions to consider, Up, Down or Neutral. The result can be right or wrong.

I know I can use the Pearson Chi-squared or the Fisher exact test. For instance I calculate my Chi-square to 2,837 which gives me a P-value of 0,242 with 2 degrees of freedom. This means I reject the hypothesis that the variables are independent?

Can someone please explain in words and/or equations how I should formulate this problem or how to interpret the results when I’m calculating X^2s and P-values?

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# Evaluate forecasts with contingency table

Can you offer guidance or do you also need help?

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