Assume you are calculating both averages for the same series of observations. Which of the two averages (geometric or arithmetic) is usually the highest? When would they be equal? What situation creates more dispersion between the two averages? What are two reasons why you might prefer geometric averages over arithmetic averages with respect to financial returns?
Added by Margarita L.
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Which of the two averages (geometric or arithmetic) is usually the highest? The arithmetic average is usually higher than the geometric average. Show more…
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