A geometric return is always less than the corresponding arithmetic return.

Question

Quizplus · Accepted Answer

In general the statement is correct,as the geometric return tends to be lower than the corresponding arithmetic return.Indeed,the greater the difference between the returns,the higher the level of volatility in the returns.Therefore,under a situation where there are constant returns,the geometric and arithmetic returns will be equal,and hence the statement is not always correct.

A Geometric Return Is Always Less Than the Corresponding Arithmetic