What is the 'Arithmetic Mean'
The arithmetic mean is a mathematical representation of the typical value of a series of numbers, computed as the sum of all the numbers in the series divided by the count of all numbers in the series. The arithmetic mean is sometimes referred to as the average or simply as the mean. Some mathematicians and scientists prefer to use the term "arithmetic mean" to distinguish it from other measures of averaging, such as the geometric mean and the harmonic mean.
BREAKING DOWN 'Arithmetic Mean'
Nearly every field in mathematics and science uses the arithmetic mean. Many of the most common metrics in economics, such as per capita income and per capita gross domestic product (GDP), are calculated using arithmetic mean.Suppose you wanted to know what the arithmetic mean of a stock's closing price was over the past week. If the stock closed at $14.50, $14.80, $15.20, $15.50 and then $14, its arithmetic mean closing price would be equal to the sum of the five numbers, $74, divided by 5, or $14.80.
Benefits of Arithmetic Mean
Perhaps the biggest benefit of using the arithmetic mean as a statistical measure is its simplicity. Anyone capable of simple addition followed by division can calculate the arithmetic mean of a data set. Of all the measures of central tendency, the arithmetic mean is least affected by fluctuations when multiple data sets are extracted from a larger population.
Limitations of Arithmetic Mean
In data sets that are skewed or where outliers are present, calculating the arithmetic mean often provides a misleading result. Consider a situation where 10 people are sitting at a restaurant table. Nine of them are teachers earning annual incomes of $45,000, while the 10th is a Silicon Valley entrepreneur who hit it big and earns $5 million per year. The arithmetic mean of their annual incomes is $540,500. This figure, however, in no way represents what the typical person at the table earns.
For data sets that do not follow a normal distribution pattern as represented by the bell curve, it is helpful to compare the arithmetic mean with other statistical measures, such as the median. In the above example, the median income at the table â€“ the income at which half the people studied are above it and half are below it â€“ is $45,000. This figure better represents the group as a whole than the arithmetic mean does. When the median and mean are far apart, as they are in this example, it indicates the data is skewed in the direction of the mean.

Mean
The simple mathematical average of a set of two or more numbers. ... 
Arithmetic Index
An index of securities that uses an arithmetic sum to determine ... 
Unweighted Index
A simple arithmetic or geometric average used to calculate stock ... 
Harmonic Average
The mean of a set of positive variables. Calculated by dividing ... 
Average Return
The simple mathematical average of a series of returns generated ... 
Trimmed Mean
A method of averaging that removes a small percentage of the ...

Trading
Calculating the Arithmetic Mean
The arithmetic mean is the average of a sum of numbers. 
Managing Wealth
Breaking Down The Geometric Mean
Understanding portfolio performance, whether for a selfmanaged, discretionary portfolio or a nondiscretionary portfolio, is vital to determining whether the portfolio strategy is working or ... 
Markets
The Most Accurate Way To Gauge Returns: The Compound Annual Growth Rate
The compound annual growth rate, or CAGR for short, represents one of the most accurate ways to calculate and determine returns for individual assets, investment portfolios and anything that ... 
Professionals
The Difference Between Series 63, 65 and 66
After passing the first core examination, usually the FINRA Series 6 or Series 7, one hurdle remains. Thatâ€™s the Series 63, 65 or 66. 
Investing
Explaining the Geometric Mean
The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment or portfolio. 
Markets
Series 24 Exam Prep: Stock Exchanges
Before you take the series 24, you need to understand exchanges, listing requirements and much more. 
Professionals
Series 66 Exam Prep: The BrokerDealer
Before you take the series 66, you need to understand civil liabilities. 
Professionals
Understanding Series 63
Series 63 is a securities license that entitles the holder to sell securities in a particular state. 
Professionals
Series 6 Exam Prep: What Is A Security?
Before you take the series 6, you need to understand what a security is as defined by the exam. 
Managing Wealth
Series A, B, C Funding: What It All Means and How It Works
Series A, B and C funding rounds have nothing to do with the alphabet, rather with the development stage of startups raising venture capital.

What is the difference between arithmetic and geometric averages?
An arithmetic average is the sum of a series of numbers divided by the count of that series of numbers. If you were asked ... Read Answer >> 
Can two numbers have the same arithmetic and geometric means?
Learn about the often complicated relationship between the geometric mean and arithmetic mean for a set of numbers, and which ... Read Answer >> 
The ABC Global mutual fund exhibited the following rates of return over the last ...
The correct answer is: a) Arithmetic Mean = (15 + 7 + 6.5 + 11.3 + 32.7)/5 = 7.18% Geometric Mean =[(1.15 x 0.93 x 1.065 ... Read Answer >> 
How can investors benefit by understanding geometric means?
Discover why investors should know the difference between geometric and arithmetic means, and why the geometric mean is more ... Read Answer >> 
I invested $200,000 with a steady yield of 8% per year that I kept for 9 years. How ...
... Read Answer >> 
What is a geometric mean in statistics?
Learn what the geometric mean is in statistics and how it is used to calculate various growth rates and returns by financial ... Read Answer >>