What is Geometric Average Return

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Definition: Popularly called Geometric Mean Return, it is primarily used for investments that are compounded. It is used to calculate average rate per period on investments that are compounded over multiple periods.

Description: The formula for calculating geometric average return is:


This formula is also used for breaking down of effective rate per period of the holding period return.

Another formula for calculating the same is:




where,

gn= Geometric Average Return

rc = cumulative return over the entire period

n = number of equal subset periods to average the return

Also See: Geometric Average, Arithmetic Average, Rate of Return, Return on Investment




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