You should be my teacher in Finance for all sorts of calculation. The way you describe, so easy and smooth. I'm glad you have this video, helped me a lot!
Fantastic explanatory on geometric return. When I commenced to see and hear, I was 0 - Zero. Once I captured your every word of explanation, I am beyond the critical value.
Excellent demo of a real use case. The devil is in the percentages, this is why it wouldn't even make sense to add them in first place. I'd love an example where the "smoothing" effect of geometric mean is compared to arithmetic mean, and maybe harmonic ? For a series of values (not %) like: 5, 6, 6, 7, 5, 2500, 6 . Thank you!
I think the confusion might come from the idea that geometric mean doesn't work when the (1+ret) factor is 0 or negative. That is different than having negative or zero returns. In order for the (1 + ret) factor to be 0 or negative, the return must be -100% or worse. If your return is -100%, you have lost all of your wealth (or the stock has gone bankrupt) and then there are no relevant future returns.
Geometric return is no longer relevant as you can't recover from a 100% loss (you are wiped out). You would need to use a dollar-weighted which assumes you can put new money in.
I thought that we can't use this kind of average when we have negatives numbres and zeros. Even my teacher and wikipedia said that! could anybody tell me or teach me anything?? thanks from Caracas Venezuela.
I am doing an exercise and I cannot get the result: Stat 101 Over a four-year period, an investment in Outa’Synch common stock yields returns of -10, 40, 0, and 20. What is the arithmetic return over this period? a. 5 percent b. 7.5 percent c. 10 percent d. 12.5 percent--> This is the marked result and my exercise according to the AAReturn: is 17.5% how can this be possible? to get 12.5 you need to have 50/4 and the information sums 70. Any help?
Kevin Bracker LOL can you guess I didnt See that minus since I thought It was some kind of Hyphen to divide the numbers from the exercise! now it fits perfectly
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You should be my teacher in Finance for all sorts of calculation. The way you describe, so easy and smooth. I'm glad you have this video, helped me a lot!
Thanks so much Kevin! Much better than my textbook and university lecturer.
You're welcome...glad you found the video helpful
What I was looking for in this subject. Hands on explanation that clarifies the difference
Thank you. It makes so much sense. Please continue doing this.
Thanks for the kind words.
Glad I found your video. Others resources did not help me. Keep up the good work and thank you!
Wow seriously, you explained this in such a lucid fashion. Great work
Thanks
Fantastic explanatory on geometric return. When I commenced to see and hear, I was 0 - Zero. Once I captured your every word of explanation, I am beyond the critical value.
Thank goodness, someone finally makes sense of all this!
Very helpful for my mba finance modules. MBA textbooks are useless as it cannot explain concepts in simple terms.
Thanks! This is simply explained and extremely helpful!
Excellent demo of a real use case. The devil is in the percentages, this is why it wouldn't even make sense to add them in first place. I'd love an example where the "smoothing" effect of geometric mean is compared to arithmetic mean, and maybe harmonic ? For a series of values (not %) like: 5, 6, 6, 7, 5, 2500, 6 . Thank you!
Nice 👍🏼
Thanks man, really help me through the final
Thanks for your help. i got it clearer than class.
very good video as well as your comments. Thank you a lot.
Very clear explanation. Great job! :)
Thank you.
great video !!!
Awesome explanation...thank you.
This was a tremendous help!
I think the confusion might come from the idea that geometric mean doesn't work when the (1+ret) factor is 0 or negative. That is different than having negative or zero returns. In order for the (1 + ret) factor to be 0 or negative, the return must be -100% or worse. If your return is -100%, you have lost all of your wealth (or the stock has gone bankrupt) and then there are no relevant future returns.
Thank You!!
You're welcome...glad the video was helpful
THANKS SO MUCH FOR THE CLIP... THAT'S HELPFUL
Thanks for sharing this video.
Thank you, sir. I don't know why can't all the MBA finance books explain like this?
Thank you very much. very helpful.
What if you have a negative return in one year? For instance, a (108%) loss, where you've lost money to fees, debt, etc.?
Thank you.
Geometric return is no longer relevant as you can't recover from a 100% loss (you are wiped out). You would need to use a dollar-weighted which assumes you can put new money in.
Thank you.
Thanks, Kevin.
very good thanks
thanks dude :) helped with my investment homework
great video!
Thank you so much!
Thanks! Really helped! :)
Thank you!
Will the geometric average be the same as finding i in a TVM equation?
Bravo!
thank you
I thought that we can't use this kind of average when we have negatives numbres and zeros. Even my teacher and wikipedia said that! could anybody tell me or teach me anything?? thanks from Caracas Venezuela.
Yes, it should be the same.
yes... I tought that too.
Thank You ! :-)
I am doing an exercise and I cannot get the result: Stat 101 Over a four-year period, an investment in Outa’Synch common stock yields returns of -10, 40, 0, and 20. What is the arithmetic return over this period?
a. 5 percent
b. 7.5 percent
c. 10 percent
d. 12.5 percent--> This is the marked result and my exercise according to the AAReturn: is 17.5% how can this be possible? to get 12.5 you need to have 50/4 and the information sums 70. Any help?
***** The first 10% is NEGATIVE 10% so you have -10+40 = 30 + 0 = 30 + 20 = 50%.
Kevin Bracker LOL can you guess I didnt See that minus since I thought It was some kind of Hyphen to divide the numbers from the exercise! now it fits perfectly
this can also be done with the help of a simple calculator.
my university should be paying you, not my good for nothing professor
speak faster
Thanks a lot!
thank you