In general, the geometric mean will be ________ the arithmetic mean for a series of returns.
A) less than
B) greater than
C) equal to
D) greater than or equal to

Question

Quizplus · Accepted Answer

The geometric mean is calculated by multiplying all the values and taking their nth root, where n is the number of values in the series. The arithmetic mean, on the other hand, is simply the average of all the values in the series. 
Since the geometric mean involves multiplying all the values, it will be smaller than the arithmetic mean if there are any negative values in the series. Even if all the values are positive, the geometric mean will still be less than the arithmetic mean if the series has high volatility or large fluctuations between the values. Therefore, the best choice is A) less than.

In General, the Geometric Mean Will Be ________ the Arithmetic