30 years: Financial markets trader
Abdulla outlines how to use and calculate the geometric average or geometric mean, also referred to as CAGR- the compounded average growth rate.
Abdulla outlines how to use and calculate the geometric average or geometric mean, also referred to as CAGR- the compounded average growth rate.
4 mins 41 secs
The Geometric Mean is also known as the compounded annual growth rate. The example below shows how to use the geometric mean to calculate the return on a portfolio. It is important to understand that the geometric average should be used instead of the arithmetic mean in the context of a time-series calculation.
Key learning objectives:
Understand the geometric average
Identify the situations in which the geometric average is more appropriate than the arithmetic average
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