# Thread: Geometric Mean Vs Arithmetic Mean

1. ## Geometric Mean Vs Arithmetic Mean

Geometric Mean Vs Arithmetic Mean

Date: November 24, 2008 11:12AM

Hi,

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?

Thank you.

2. 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.

3. Date: November 24, 2008 06:47PM

Strange. I'm pretty sure arithmetic mean is standard in both cases.

4. Date: November 24, 2008 07:09PM

you wouldnt use geometric mean in a cov calculation. that doesnt make any sense

5. Date: November 24, 2008 08:17PM

here's finally found the question.

Given,
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

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