Geometric Mean Vs Arithmetic Mean
Date: November 24, 2008 11:12AM
Do we use geometric mean (instead of arithmetic mean) in Coef. of Variation calculation = Std. Dev/geometric mean?
I also noticed in mock exam that they used geometric mean for sharpe ratio = (geometric mean - RFR)/Std. Deviation.
Could anyone confirm?
Date: November 24, 2008 11:26AM
By definition it should be the arithmetic mean for both, check the Mock again, I remember using the Am NOT the Gm.
Date: November 24, 2008 06:47PM
Strange. I'm pretty sure arithmetic mean is standard in both cases.
Date: November 24, 2008 07:09PM
you wouldnt use geometric mean in a cov calculation. that doesnt make any sense
Date: November 24, 2008 08:17PM
here's finally found the question.
Arithmetic mean return = 14.30%
Geom. mean return = 12.70%
Variance = 380
Beta = 1.35
RFR = 4.25%
The Coef. of Variation and Sharpe Ratio, respectively are:
A) 1.36, 0.52
B) 1.36, 7.44
C) 1.53, 0.52
D) 1.53, 7.44