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Geometric Mean

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Example: an investment returned +10%, −20% and +30% in three years in a row, that is, it was multiplied by 1.1, 0.8 and 1.3. What was the average return per year? Change the values to work out your own case.

Step by step

    What each term means

    Geometric Mean (G)
    The value that, multiplied by itself n times, gives the same product as the data. It is the right average for factors that multiply, such as growth rates and indices.
    Root Index (n)
    The number of values. The n-th root undoes the product of n factors, just as dividing by n undoes the sum in the arithmetic mean.
    Product (Πxᵢ)
    The product of all the values: x₁ · x₂ · … · xₙ. For many values, it is safer to add up the logarithms, which gives the same result without the calculation blowing up.