Geometric mean

Geometric mean returns are calculated by taking account of compounding.

(Contrasted with the arithmetic mean, which ignores compounding).

For 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%.

See also

• Arithmetic mean