mp3bu

C-uff-A Wrote:
-------------------------------------------------------
> d0pa, I don't think it makes sense to use
> geometric mean for the cross section e.g. the
> average return for a given year across all
> securities. And in Excel, method 1 & 2 yield
> different results (ca 5% difference).


But then, you'll have to normalize it (give weights) with market cap otherwise simple AM of returns means higher weigh for out-sized return and lower weight of lower return, while using GM means taking equal weight for returns. In AM, whenever few of the securities will post high return (say 10 names with 40% return) and rest will post low (90 names with 2% return), in this case AM (5.8) is more then twice the GM (2.6). If few names give outlier returns, they'll screw up AM.