Difference between revisions of "Geometric mean"

From ACT Wiki
Jump to: navigation, search
m (Spacing 27/8/13)
(Updated entry. Source ACT Glossary of terms)
Line 5: Line 5:
 
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:
  
(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%.
  
  
 
== See also ==
 
== See also ==
 
* [[Arithmetic mean]]
 
* [[Arithmetic mean]]

Revision as of 14:55, 22 November 2014

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