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Statistical function
GEOMEAN
Returns the geometric mean, the right average for growth rates.
OccasionalDifficulty 1250 · ProficientUsage rank #196 of 520
When to use it
The geometric mean: the n-th root of the product. The right average for growth factors and ratios, where the arithmetic mean overstates.
The shape of it
- Syntax
=GEOMEAN(number1, [number2], ...)
Worked examples
Two numbers
=GEOMEAN(2,8) → 4
Square root of 16.
Average growth rate
=GEOMEAN(1.05,1.03,1.04)-1 → 0.039968
Average annual growth from three yearly factors: 3.9968%, slightly below the arithmetic 4%.
A range of factors
=GEOMEAN(A2:A11) → 1.062
Ten years of growth factors.
Worth knowing
- Convert rates to factors (1 + rate) before GEOMEAN, then subtract 1.
- Same as EXP(AVERAGE(LN(range))).
- For a CAGR from start and end values use RRI or POWER.
Where it goes wrong
- #NUM! when any value is zero or negative, so use factors, not raw returns.
- Blanks and text are ignored.
Related
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