<< Chapter < Page Chapter >> Page >

The mean (Arithmetic), median and mode are all measures of the “center” of the data, the “average”. They are all in their own way trying to measure the “common” point within the data, that which is “normal”. In the case of the arithmetic mean this is solved by finding the value from which all points are equal linear distances. We can imagine that all the data values are combined through addition and then distributed back to each data point in equal amounts. The sum of all the values is what is redistributed in equal amounts such that the total sum remains the same.

The geometric mean redistributes not the sum of the values but the product of multiplying all the individual values and then redistributing them in equal portions such that the total product remains the same. This can be seen from the formula for the geometric mean, x ~ : (Pronounced x-tilde)

x ~ = ( i = 1 n π i ) 1 n = x 1 * x 2 ∙∙∙ x n n = ( x 1 * x 2 ∙∙∙ x n ) 1 n

where π is the mathematical symbol that tells us to multiply all the x i numbers in the same way capital Greek sigma tells us to add all the x i numbers. Remember that a fractional exponent is calling for the nth root of the number thus an exponent of 1/3 is the cube root of the number.

The geometric mean answers the question, "if all the quantities had the same value, what would that value have to be in order to achieve the same product?” The geometric mean gets its name from the fact that when redistributed in this way the sides form a geometric shape for which all sides have the same length. To see this, take the example of the numbers 10, 51.2 and 8. The geometric mean is the product of multiplying these three numbers together (4,096) and taking the cube root because there are three numbers among which this product is to be distributed. Thus the geometric mean of these three numbers is 16. This describes a cube 16x16x16 and has a volume of 4,096 units.

The geometric mean is relevant in Economics and Finance for dealing with growth: growth of markets, in investment, population and other variables the growth of which there is an interest. Imagine that our box of 4,096 units (perhaps dollars) is the value of an investment after three years and that the investment returns in percents were the three numbers in our example. The geometric mean will provide us with the answer to the question, what is the average rate of return: 16 percent. The arithmetic mean of these three numbers is 23.6 percent. The reason for this difference, 16 versus 23.6, is that the arithmetic mean is additive and thus does not account for the interest on the interest, compound interest, embedded in the investment growth process. The same issue arises when asking for the average rate of growth of a population or sales or market penetration, etc., knowing the annual rates of growth. The formula for the geometric mean rate of return, or any other growth rate, is:

r s = ( x 1 * x 2 ∙∙∙ x n ) 1 n - 1

Manipulating the formula for the geometric mean can also provide a calculation of the average rate of growth between two periods knowing only the initial value a 0 and the ending value a n and the number of periods, n . The following formula provides this information:

( a n a 0 ) 1 n = x ~

Finally, we note that the formula for the geometric mean requires that all numbers be positive, greater than zero. The reason of course is that the root of a negative number is undefined for use outside of mathematical theory. There are ways to avoid this problem however. In the case of rates of return and other simple growth problems we can convert the negative values to meaningful positive equivalent values. Imagine that the annual returns for the past three years are +12%, -8%, and +2%. Using the decimal multiplier equivalents of 1.12, 0.92, and 1.02, allows us to compute a geometric mean of 1.0167. Subtracting 1 from this value gives the geometric mean of +1.67% as a net rate of population growth (or financial return). From this example we can see that the geometric mean provides us with this formula for calculating the geometric (mean) rate of return for a series of annual rates of return:

r s = x ~ - 1

where r s is average rate of return and x ~ is the geometric mean of the returns during some number of time periods. Note that the length of each time period must be the same.

As a general rule one should convert the percent values to its decimal equivalent multiplier. It is important to recognize that when dealing with percents, the geometric mean of percent values does not equal the geometric mean of the decimal multiplier equivalents and it is the decimal multiplier equivalent geometric mean that is relevant.

Formula review

The Geometric Mean: x ~ = ( i = 1 n π i ) 1 n = x 1 * x 2 ∙∙∙ x n n = ( x 1 * x 2 ∙∙∙ x n ) 1 n

Questions & Answers

where we get a research paper on Nano chemistry....?
Maira Reply
nanopartical of organic/inorganic / physical chemistry , pdf / thesis / review
Ali
what are the products of Nano chemistry?
Maira Reply
There are lots of products of nano chemistry... Like nano coatings.....carbon fiber.. And lots of others..
learn
Even nanotechnology is pretty much all about chemistry... Its the chemistry on quantum or atomic level
learn
Google
da
no nanotechnology is also a part of physics and maths it requires angle formulas and some pressure regarding concepts
Bhagvanji
hey
Giriraj
Preparation and Applications of Nanomaterial for Drug Delivery
Hafiz Reply
revolt
da
Application of nanotechnology in medicine
what is variations in raman spectra for nanomaterials
Jyoti Reply
ya I also want to know the raman spectra
Bhagvanji
I only see partial conversation and what's the question here!
Crow Reply
what about nanotechnology for water purification
RAW Reply
please someone correct me if I'm wrong but I think one can use nanoparticles, specially silver nanoparticles for water treatment.
Damian
yes that's correct
Professor
I think
Professor
Nasa has use it in the 60's, copper as water purification in the moon travel.
Alexandre
nanocopper obvius
Alexandre
what is the stm
Brian Reply
is there industrial application of fullrenes. What is the method to prepare fullrene on large scale.?
Rafiq
industrial application...? mmm I think on the medical side as drug carrier, but you should go deeper on your research, I may be wrong
Damian
How we are making nano material?
LITNING Reply
what is a peer
LITNING Reply
What is meant by 'nano scale'?
LITNING Reply
What is STMs full form?
LITNING
scanning tunneling microscope
Sahil
how nano science is used for hydrophobicity
Santosh
Do u think that Graphene and Fullrene fiber can be used to make Air Plane body structure the lightest and strongest. Rafiq
Rafiq
what is differents between GO and RGO?
Mahi
what is simplest way to understand the applications of nano robots used to detect the cancer affected cell of human body.? How this robot is carried to required site of body cell.? what will be the carrier material and how can be detected that correct delivery of drug is done Rafiq
Rafiq
if virus is killing to make ARTIFICIAL DNA OF GRAPHENE FOR KILLED THE VIRUS .THIS IS OUR ASSUMPTION
Anam
analytical skills graphene is prepared to kill any type viruses .
Anam
Any one who tell me about Preparation and application of Nanomaterial for drug Delivery
Hafiz
what is Nano technology ?
Bob Reply
write examples of Nano molecule?
Bob
The nanotechnology is as new science, to scale nanometric
brayan
nanotechnology is the study, desing, synthesis, manipulation and application of materials and functional systems through control of matter at nanoscale
Damian
Is there any normative that regulates the use of silver nanoparticles?
Damian Reply
what king of growth are you checking .?
Renato
What fields keep nano created devices from performing or assimulating ? Magnetic fields ? Are do they assimilate ?
Stoney Reply
why we need to study biomolecules, molecular biology in nanotechnology?
Adin Reply
?
Kyle
yes I'm doing my masters in nanotechnology, we are being studying all these domains as well..
Adin
why?
Adin
what school?
Kyle
biomolecules are e building blocks of every organics and inorganic materials.
Joe
how did you get the value of 2000N.What calculations are needed to arrive at it
Smarajit Reply
Privacy Information Security Software Version 1.1a
Good
Got questions? Join the online conversation and get instant answers!
Jobilize.com Reply

Get the best Algebra and trigonometry course in your pocket!





Source:  OpenStax, Introductory statistics. OpenStax CNX. Aug 09, 2016 Download for free at http://legacy.cnx.org/content/col11776/1.26
Google Play and the Google Play logo are trademarks of Google Inc.

Notification Switch

Would you like to follow the 'Introductory statistics' conversation and receive update notifications?

Ask