Mean

AAA

DEFINITION of 'Mean'

The simple mathematical average of a set of two or more numbers. The mean for a given set of numbers can be computed in more than one way, including the arithmetic mean method, which uses the sum of the numbers in the series, and the geometric mean method. However, all of the primary methods for computing a simple average of a normal number series produce the same approximate result most of the time.

INVESTOPEDIA EXPLAINS 'Mean'

If stock XYZ closed at $50, $51 and $54 over the past three days, the arithmetic mean would be the sum of those numbers divided by three, which is $51.67.

In contrast, the geometric mean would be computed as third root of the numbers' product, or the third root of 137,700, which approximately equals $51.64. While the two numbers are not exactly equal, most people consider arithmetic and geometric means to be equivalent for everyday purposes.

VIDEO

Loading the player...
RELATED TERMS
  1. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth ...
  2. Variance

    The spread between numbers in a data set, measuring Variance ...
  3. Standard Deviation

    1. A measure of the dispersion of a set of data from its mean. ...
  4. Coefficient Of Variation - CV

    A statistical measure of the dispersion of data points in a data ...
  5. Mean Reversion

    A theory suggesting that prices and returns eventually move back ...
  6. Arithmetic Mean

    A mathematical representation of the typical value of a series ...
RELATED FAQS
  1. What is the difference between variance and standard deviation?

    Variance and standard deviation are both concepts that help statisticians and financial professionals understand differences ... Read Full Answer >>
  2. How do you calculate variance in Excel?

    To calculate statistical variance in Microsoft Excel, use the built-in Excel function VAR. Given a set of numbers value1 ... Read Full Answer >>
  3. What is the difference between standard deviation and mean?

    Understanding the calculation and interpretation of mathematical fundamentals such as mean and standard deviation is essential ... Read Full Answer >>
  4. What are some examples of ways that sensitivity analysis can be used?

    Sensitivity analysis is an analysis method that is used to identify how much variations in the input values for a given variable ... Read Full Answer >>
  5. How is the 80-20 rule (Pareto's Principle) used in macroeconomics?

    The 80-20 rule was first used in macroeconomics to describe the distribution of wealth in Italy in the early 20th century, ... Read Full Answer >>
  6. What are some of the uses of the coefficient of variation (COV)?

    In statistics, the coefficient of variation (COV) is a simple measure of relative event dispersion. It is equal to the ratio ... Read Full Answer >>
Related Articles
  1. Active Trading Fundamentals

    Weighted Moving Averages: The Basics

    We take a closer look at the linearly weighted moving average and the exponentially smoothed moving average.
  2. Personal Finance

    2 Years Of Education, A Lifetime Of Success

    Believe it or not, many two-year colleges have advantages over their four-year counterparts.
  3. Fundamental Analysis

    Calculating the Herfindahl-Hirschman Index (HHI)

    The Herfindhal-Hirschman Index, (HHI) is a measure of market concentration and competition among market participants.
  4. Fundamental Analysis

    Calculating Net Interest Margin

    Net interest margin is a metric used to measure the effectiveness of a company’s investment decisions, particularly financial institutions.
  5. Economics

    Why The U.S. Economy Is Ready For Liftoff

    Though the U.S. economy is once again underperforming expectations, as it has for the past five years, the economy is ready for a (Fed) interest rate hike.
  6. Fundamental Analysis

    Calculating Book Value of Equity Per Share (BVPS)

    Book value of equity per share compares the total shareholder equity, as stated in the company’s balance sheet, to the total number of shares outstanding.
  7. Fundamental Analysis

    How to Calculate a Combined Ratio

    Combined ratio is a formula used in the insurance industry to measure the performance of an insurance company.
  8. Investing Basics

    Calculating the Macaulay Duration

    The weighted average term to maturity of the cash flows from a bond.
  9. Fundamental Analysis

    Explaining Annual Returns

    Annual return is the standard percentage rate for most investments and credit facilities.
  10. Investing Basics

    What is the Rule of 70?

    The rule of 70 is an easy way to calculate how many years it will take for an investment to double in size.

You May Also Like

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  3. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  4. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  5. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
  6. Risk Premium

    The return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is ...
Trading Center