Which of the following statements is FALSE?

A) The geometric average return is a better description of the long-run historical performance

of an investment.

B) The geometric average return will always be above the arithmetic average return, and the

difference grows with the volatility of the annual returns.

C) The compounded geometric average return is most often used for comparative purposes.

D) We should use the arithmetic average return when we are trying to estimate an

investmentʹs expected return over a future horizon based on its past performance.

Question

Xander Guzman

Business

2 September, 08:22

Which of the following statements is FALSE?

A) The geometric average return is a better description of the long-run historical performance

of an investment.

B) The geometric average return will always be above the arithmetic average return, and the

difference grows with the volatility of the annual returns.

C) The compounded geometric average return is most often used for comparative purposes.

D) We should use the arithmetic average return when we are trying to estimate an

investmentʹs expected return over a future horizon based on its past performance.

+3

Answers (1)

Know the Answer?

Nikhil Obrien · Answer 1

The answer is letter B

Explanation:

The false statement is letter B, The geometric average return will always be above the arithmetic average return, and the difference grows with the volatility of the annual returns.

Because the geometric average return will always be bellow the arithmetic average return, and the difference grows with the volatility of the annual returns.