Session 2: Quantitative Methods: Basic Concepts
Reading 7: Statistical Concepts and Market Returns
LOS l: Discuss the use of arithmetic mean or geometric mean when determining investment returns.
In the most recent four years, an investment has produced annual returns of 4%, –1%, 6%, and 3%. The most appropriate estimate of the next year’s return, based on these historical returns, is the:
Given a series of historical returns, the arithmetic mean is statistically the best estimator of the next year’s return. For estimating a compound return over more than one year, the geometric mean of the historical returns is the most appropriate estimator. | 
发表于 2011-3-1 14:52
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