Geometric mean: Difference between revisions
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imported>Doug Williamson (Updated entry. Source ACT Glossary of terms) |
imported>Doug Williamson (Standardise appearance of page) |
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(Contrasted with the arithmetic mean, which ignores compounding). | (Contrasted with the arithmetic mean, which ignores compounding). | ||
(1.04 x 1.05 x 1.06)<sup>(1/3)</sup> -1 | '''Example''' | ||
The geometric mean return calculated from sample returns of 4%, 5% and 6% is given by: | |||
( 1.04 x 1.05 x 1.06 )<sup>(1/3)</sup> - 1 | |||
= 4.9968%. | = 4.9968%. | ||
Revision as of 14:57, 16 March 2015
Geometric mean returns are calculated by taking account of compounding.
(Contrasted with the arithmetic mean, which ignores compounding).
Example
The geometric mean return calculated from sample returns of 4%, 5% and 6% is given by:
( 1.04 x 1.05 x 1.06 )(1/3) - 1
= 4.9968%.
