Geometric mean

From ACT Wiki
Revision as of 11:44, 27 August 2013 by Doug Williamson (Talk | contribs) (Spacing 27/8/13)

Jump to: navigation, search

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