Question

A stock has produced returns of 11.9 percent, 5.6 percent, 16.4 percent, and -4.2 percent over the past four years, respectively. what is the geometric average return?

Answer 1

The average annual return is

$\displaystyle ((1+0.119)(1+0.056)(1+01.64)(1-0.042))^{\frac{1}{4}}-1=\sqrt[4]{1.317687706368}-1\\\\ \approx 7.14\%$