Difference between Geometric Mean and CAGR? return, either, between, only

w1977

When given asset value, we are able to use either but when given the return rates, we can only use Geometric Mean?

Thanks.

Bluetick1010

I'm not sure if I understand your question completely. CAGR and Geometric Mean are the same thing.

lc26mizzou

revenant Wrote:
-------------------------------------------------------
>
> When computing the growth rate given the returns
> over the few years, I suppose we use Geometric
> Mean to calculate?
>
> When computing the growth rate given the beginning
> and ending value, we use CAGR to calculate?
>
> If not, how do you calculate returns using CAGR
> since its formula is "(Ending / Beginning) ^
> (1/years) -1" ?
>
> Thanks.

Anyone?

disiz64

tsx11 Wrote:
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> these methods should result in the same figure, so
> i'd say that depending upon the input provided,
> make the choice from that.

I can't see that happening actually.

What if a stock's value for the last 3 years are $10, $20, then $15? We don't just use (15-10)^1/3 -1 do we?

Just trying to make things clearer.

Thanks.

nitoha

YR1-2
growth rate: (20-10)/10 = 100%

Yr 2-3
growth rate: (15-20)/20 = -25%

CAGR: (2*.75) ^ 1/2 = 1.2247 ==> 22.47%

which is the same as (15-10)/10 ^ 1/2

remember that you have to look at the intervenining number of periods -- which is 2 and not 3 as you have used above.

CP