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#1 2013-11-19 09:05:57

kloser123
Member
Registered: 2013-11-19
Posts: 5

geomean

Hi there,

Given N sets of values, I'm trying to figure out why averaging the returns per period across sets of values always produces a higher geomean than

first averaging the values per period across tests, then calculating period-to-period returns, and then taking the geomean of those returns.

I used the RAND function for each value as to quickly iterate different "tests".

Thank you

Last edited by kloser123 (2013-11-19 09:42:57)

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#2 2013-11-19 09:29:33

bobbym
From: Bumpkinland
Registered: 2009-04-12
Posts: 88,695

Re: geomean

Hi kloser123;

Welcome to the forum. I do not see the spreadsheet.

In mathematics, you don't understand things. You just get used to them.

I agree with you regarding the satisfaction and importance of actually computing some numbers. I can't tell you how often I see time and money wasted because someone didn't bother to run the numbers.

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#3 2013-11-20 01:29:10

kloser123
Member
Registered: 2013-11-19
Posts: 5

Re: geomean

obviously, monthly return and avg geomeans differ in some months.
But I don't know why the final geomean for the whole period is always higher.
Can you help please?
Thank you

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#4 2013-11-20 01:45:45

bobbym
From: Bumpkinland
Registered: 2009-04-12
Posts: 88,695

Re: geomean

Hi;

Please provide the spreadsheet or an example.

In mathematics, you don't understand things. You just get used to them.

I agree with you regarding the satisfaction and importance of actually computing some numbers. I can't tell you how often I see time and money wasted because someone didn't bother to run the numbers.

Online

#5 2013-11-20 02:02:16

kloser123
Member
Registered: 2013-11-19
Posts: 5

Re: geomean

how can I attach it?

1 year    Jan      Feb               Mar    Apr        May    Jun     Jul            Aug    Sep    Oct            Nov    Dec          Jan          Geomean
\$1.000     \$1.285    \$1.153    \$815    \$1.362    \$905     \$1.041    \$859    \$931    \$1.027    \$878    \$860       \$1.038
29%    -10%           -29%    67%           -34%    15%          -17%    8%    10%           -15%    -2%        21%
\$1.000    \$985             \$1.195    \$1.251 \$929    \$830    \$1.049 \$1.295    \$963    \$1.139 \$1.173    \$1.057  \$1.231
-2%             21%            5%       -26%    -11%     26%           23%      -26%     18%      3%         -10%    16%
\$1.000    \$1.153    \$910         \$1.187   \$802  \$1.235    \$923       \$1.308 \$1.205    \$806      \$949    \$992      \$919
15%           -21%          30%    -32%           54%    -25%           42%    -8%    -33%      18%         5%    -7%

1)    Avg values    \$1.000    \$1.141    \$1.086    \$1.084    \$1.031    \$990    \$1.004    \$1.154    \$1.033    \$991    \$1.000    \$970    \$1.063
Monthly return        1,14    0,95    1,00    0,95    0,96    1,01    1,15    0,90    0,96    1,01    0,97    1,10    0,508%    =    0,508%
CAGR formula matches averaging values perfectly
2)    Avg geomeans        1,14    0,97    1,02    1,03    1,03    1,05    1,16    0,92    0,98    1,02    0,98    1,10    3,097%

Geomean of averaged monthly geomeans - geomean of averaged monthly values                                    2,589%

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#6 2013-11-20 02:27:57

bobbym
From: Bumpkinland
Registered: 2009-04-12
Posts: 88,695

Re: geomean

Hi;

I am sorry I cannot read that, can you take a screenshot?

This is what your post looks like on my browser.

In mathematics, you don't understand things. You just get used to them.

I agree with you regarding the satisfaction and importance of actually computing some numbers. I can't tell you how often I see time and money wasted because someone didn't bother to run the numbers.

Online

#7 2013-11-20 13:30:18

kloser123
Member
Registered: 2013-11-19
Posts: 5

Re: geomean

how can I paste it?

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#8 2013-11-20 13:48:01

bobbym
From: Bumpkinland
Registered: 2009-04-12
Posts: 88,695

Re: geomean

You would need a screen capture. or you can post it in small pieces.

In mathematics, you don't understand things. You just get used to them.

I agree with you regarding the satisfaction and importance of actually computing some numbers. I can't tell you how often I see time and money wasted because someone didn't bother to run the numbers.

Online

#9 2013-11-20 14:22:03

kloser123
Member
Registered: 2013-11-19
Posts: 5

Re: geomean

1 year    Jan       Feb     Mar       Apr    May    Geomean
\$1.000     \$1.144    \$1.074    \$994    \$962
14%    -6%            -7%    -3%
\$1.000    \$1.159    \$1.158    \$944    \$1.036
16%              0%           -18%    10%
\$1.000    \$1.112    \$914         \$1.217    \$1.214
11%    -18%          33%    0%

Avg values    \$1.000 \$1.138    \$1.049 \$1.052    \$1.071
Monthly return        1,14    0,92    1,00    1,02    1,722%    =    1,722%
CAGR formula matches averaging values perfectly
Avg geomeans        1,14    0,92    1,02    1,02    2,292%

Geomean of averaged monthly geomeans - geomean of averaged monthly values    0,570%

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#10 2013-11-20 14:38:05

bobbym
From: Bumpkinland
Registered: 2009-04-12
Posts: 88,695

Re: geomean

Hi;

The picture below is what I am seeing. I can not make any sense out of it. Maybe someone else can, sorry for the bother.

In mathematics, you don't understand things. You just get used to them.

I agree with you regarding the satisfaction and importance of actually computing some numbers. I can't tell you how often I see time and money wasted because someone didn't bother to run the numbers.

Online