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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
Administrator
From: Bumpkinland
Registered: 2009-04-12
Posts: 88,760

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
Administrator
From: Bumpkinland
Registered: 2009-04-12
Posts: 88,760

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.

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#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
Administrator
From: Bumpkinland
Registered: 2009-04-12
Posts: 88,760

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.

View Image: 2013-11-20_062447.gif

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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#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
Administrator
From: Bumpkinland
Registered: 2009-04-12
Posts: 88,760

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.

Offline

#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
Administrator
From: Bumpkinland
Registered: 2009-04-12
Posts: 88,760

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.

View Image: 2013-11-20_183326.gif

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.

Offline

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