As shown previously, at -20.08%, the geometric mean provides a return that’s a lot worse than the 12% arithmetic mean. But it is the result that represents reality in this case.

As a mathematical rule, the geometric mean will always be equal to or less than the arithmetic mean. However, the true return is as follows: Year 1: $100 x 1.10 = $110.00 ...

Perhaps the arithmetic mean (of 2 numbers) should also be an operator. Report comment. Reply. Martin Moene says: August 24, 2024 at 12:59 pm Like the insight this article brings, the unification :) ...