When used to evaluate the performance of an investment,the geometric mean is considered to be superior to the arithmetic mean.

Question

Quizplus · Accepted Answer

The geometric mean takes into account the effects of compounding and is a better measure of average growth rate over time. Meanwhile, the arithmetic mean simply adds up returns and divides by the number of periods, which can be misleading if returns are volatile or if there are large gains or losses. Therefore, the geometric mean is considered superior for evaluating investment performance.

When Used to Evaluate the Performance of an Investment,the Geometric