# What Is a Geometric Mean?

How to Calculate and Example. A geometric mean is a type of mean or average, which is used to find the central tendency of a data set. Geometric mean is a good choice for averaging when you have data that is skewed, because it is not affected by outliers.

To calculate the geometric mean, you take the product of all the data points in the data set, and then take the nth root of that number, where n is the number of data points in the set.

For example, if you have a data set with the values 1, 2, 4, and 8, the product of all these values is 64. The geometric mean would be the square root of 64, which is 8.

The geometric mean is often used in statistics and finance, because it can give you a more accurate picture of how a data set is distributed. For example, if you are looking at the return on investment for a stock over a period of time, the geometric mean will give you a better idea of the true average return, because it is not affected by outliers (such as a stock that suddenly skyrockets or plummets).

#### How is geometric mean used in real life?

Geometric mean is used in financial analysis to calculate the return of an investment over multiple periods. This is done by taking the nth root of the product of the investment's return over each period. For example, if an investment earned a return of 10% in year 1, 20% in year 2, and 30% in year 3, the geometric mean return would be calculated as follows:

10% * 20% * 30% = 0.06

The nth root of 0.06 is 3.16, so the geometric mean return for this investment would be 3.16%.

Geometric mean is used in real life because it is a more accurate measure of an investment's return than simple arithmetic mean. This is because geometric mean takes into account the compounding effect of returns over multiple periods. What is the geometric mean of 4 and 3? The geometric mean of 4 and 3 is 3.6. What is the geometric mean of 3 and 12? The geometric mean of 3 and 12 is (3*12)^(1/2) = 6. What is the geometric mean of 4 and 5? The geometric mean of 4 and 5 is the square root of their product, or 20. What does geometric average mean finance? The geometric mean is a type of average that is used to calculate the mean return of an investment over a period of time. The geometric mean is calculated by taking the nth root of the product of all the returns over the period of time. The nth root is the number that, when raised to the power of n, equals the number. For example, the 3rd root of 8 is 2, because 2 raised to the 3rd power equals 8.

The geometric mean is often used to calculate the average return of an investment that has been compound over a period of time, such as an investment in a mutual fund. The geometric mean return is less than the arithmetic mean return when the investment has been volatile, because the geometric mean takes into account the fact that the investment's value can go down as well as up.

To calculate the geometric mean return, you first need to calculate the compound return for each period. To do this, you take the investment's return for the period and add it to one. You then multiply this by the investment's return for the next period and add it to one, and so on. You then take the nth root of the product of all these compound returns.

For example, let's say you invest in a mutual fund that has the following returns over a five-year period: 10%, 5%, 15%, -10%, 25%. The first thing you need to do is calculate the compound return for each period. The compound return for the first period is 10% + 1 = 1.1. The compound return for the second period is (1.1 x 5%) + 1 = 1.05. The compound return for the third period is (1.05 x 15%) + 1 = 1.1575. The compound return for the fourth period is (1.1575 x -10%) + 1 = 1.04225. The compound return for the fifth period is