Question

A stock has produced returns of 14.5 percent, 4.8 percent, 10.2 percent, and 6.1 percent over the past four years respectively. what is the geometric average return?

Answer 1

The geometric average return is the the nth root of the product of the stock returns. So we have nâš r1 * r2 * r3. Where n is the number of returns. So we have 4âš(14.5 * 4.8 * 10.2 * 6 1) This gives us 4âš ( 4330.512) The fourth root of 4330.512 is 8.1121 percent.