The geometric mean return on large-company stocks for the 1926-2012 period:
A)is approximately equal to the arithmetic mean return plus one-half of the standard deviation.
B)exceeds the arithmetic mean return.
C)is approximately equal to the arithmetic mean return minus one-half of the standard deviation.
D)is approximately equal to the arithmetic mean return plus one-half of the variance.
E)is less than the arithmetic mean return.

Question

Quizplus · Accepted Answer

The geometric mean return is typically less than the arithmetic mean return because it accounts for the compounding effect over time, which reduces the impact of volatility.

The Geometric Mean Return on Large-Company Stocks for the 1926-2012