Quick Definition

The geometric mean is a type of average that indicates the central tendency of a set of numbers by using the product of their values. It is particularly useful for understanding rates of return over time in finance.

Formula

Examples

• 1Calculating the average growth rate of an investment portfolio that has varied returns over multiple years.
• 2Determining the average rate of return for a set of investments when each has its own compounding period.
• 3Using geometric mean to compare the performance of different investment funds over a similar period.

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