# Difference between revisions of "Geometric mean"

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Geometric mean returns are calculated by taking account of compounding. | Geometric mean returns are calculated by taking account of compounding. | ||

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(Contrasted with the arithmetic mean, which ignores 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: | For example, the geometric mean return calculated from sample returns of 4%, 5% and 6% is given by: | ||

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(1.04 x 1.05 x 1.06)<sup>(1/3)</sup> -1 = 4.9968%. | (1.04 x 1.05 x 1.06)<sup>(1/3)</sup> -1 = 4.9968%. | ||

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== See also == | == See also == | ||

* [[Arithmetic mean]] | * [[Arithmetic mean]] |

## Revision as of 11:44, 27 August 2013

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%.