Which of the following statements regarding the geometric mean is MOST accurate?
Multiple choice question.
The geometric mean is less sensitive to extreme values than the arithmetic mean.
The geometric mean return is a better measure than the arithmetic mean return when considering an investment over a single time period.
Two mathematical steps are needed to calculate the geometric mean: Addition and Division.
The geometric mean return is a better measure than the arithmetic mean return when considering an investment over a single time period.
The correct statement regarding the geometric mean is:
The geometric mean return is a better measure than the arithmetic mean return when considering an investment over a single time period.
The geometric mean is often preferred over the arithmetic mean for analyzing investment returns because it provides a more accurate representation of the compound growth rate over time.