From the course: Excel for Investment Professionals

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Computing arithmetic and geometric returns in a portfolio

Computing arithmetic and geometric returns in a portfolio - Microsoft Excel Tutorial

From the course: Excel for Investment Professionals

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Computing arithmetic and geometric returns in a portfolio

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- [Instructor] As an investor, one of the most critical tasks you face is going through and computing performance statistics on your portfolio. Two common performance statistics you'll probably want to be familiar with are the arithmetic mean and the geometric mean. Let me show you how those are computed in Excel. I'm in the 03_03_Begin Excel file. Now, what we have here are two different assets, asset number one, and asset number two, and their returns throughout the year 2019. For asset number one, its returns start off relatively weak. It loses 3.6% in January before bouncing back for several months and then losing more money during the middle of the year. In order to go through and compute the arithmetic mean, we would simply use the AVERAGE function and select all of the numbers in question. Now let's try doing this for asset number two. So in this case, I'm going to use the AVERAGE function, and I'm going to select all of the return statistics that I'm interested in. Now, what…

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