GM is calculated by multiplying all the periodic returns and taking the root of the number of such durations. In the light of equation 1 we can arrive at. The geometric mean is the average growth of an investment computed by multiplying n variables and then taking the nth root.
For example to calculate the geometric mean of the values 12 -8 and 2 instead calculate the geometric mean of their decimal multiplier equivalents of 112 092 and 102 to compute a geometric mean of 10167.
4 9 1 2 36 1 2 6. To calculate the geometric mean return you only need to know the initial investment the final return and the number of years until the payoff. To take care of such anomalies the geometric average geometric mean or GM should be preferred over the arithmetic mean. The geometric mean is the average growth of an investment computed by multiplying n variables and then taking the nth root.