DEFINITION of '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. Technically defined as "the 'n'th root product of 'n' numbers", the formula for calculating geometric mean is most easily written as:
Where 'n' represents the number of returns in the series.
The geometric mean must be used when working with percentages (which are derived from values), whereas the standard arithmetic mean will work with the values themselves.
INVESTOPEDIA EXPLAINS 'Geometric Mean'
The main benefit to using the geometric mean is that the actual amounts invested do not need to be known; the calculation focuses entirely on the return figures themselves and presents an "applestoapples" comparison when looking at two investment options.
VIDEO

Harmonic Average
The mean of a set of positive variables. Calculated by dividing ... 
Mean
The simple mathematical average of a set of two or more numbers. ... 
Weighted Average
An average in which each quantity to be averaged is assigned ... 
Market Average
A measure of the overall price level of a given market, as defined ... 
Trimmed Mean
A method of averaging that removes a small percentage of the ... 
Winsorized Mean
A method of averaging that initially replaces the smallest and ...

Active Trading Fundamentals
Simple Moving Averages Make Trends Stand ...

Fundamental Analysis
How To Calculate Your Investment Return

Investing
Calculating The Means

Investing Basics
Overcoming Compounding's Dark Side