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What is a 'Mean'

A mean is 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.

BREAKING DOWN '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.

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RELATED FAQS
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    Learn about the often complicated relationship between the geometric mean and arithmetic mean for a set of numbers, and which ... Read Answer >>
  2. 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 >>
  3. How do you calculate the geometric mean to assess portfolio performance?

    Learn how to calculate the geometric mean. Understand when the geometric mean should be used and how it differs from the ... Read Answer >>
  4. 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 >>
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  6. 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 >>
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