101 reputation
1
bio website math.uchicago.edu/~amarcus
location Chicago, IL
age 31
visits member for 3 years, 3 months
seen Jun 3 at 17:51

Math grad student. I study representation theory.


Jul
21
comment Diversification, Rebalancing and Different Means
So the "geometric return" (or geometric average) is just the overall percentage increase (plus one). This completely explains the third author. I would have to think more about the first two. However, they are not comparing GM to AM, they are using GM to measure the yield of the portfolio (or individual stocks), and AM to compute return in terms of return of the individual components.
Jul
21
comment Diversification, Rebalancing and Different Means
Looking at some of the additional quotes, I don't think they are using geometric means the way I think you think they are. They are measuring the return of a stock in terms of the percentage increase, and to determine the average daily increase over a period of time, you take the geometric, not arithmetic means of the daily ratios. The need for the terminology (geometric return) is that some people would report the arithmetic mean of the daily/monthly/yearly returns, which would over report earnings. Because the correct measure is different than what some use, it needs a special name.
Jun
29
comment Diversification, Rebalancing and Different Means
The main question to answer before we can address the posting question is: how are we measuring the benefit of rebalancing? Is it strictly a matter of volatility? Strictly expected returns? Some combination of the two? It doesn't make any sense to compare the benefits in the way they do without a particular metric in mind. Does the paper list one?
Jun
29
awarded  Autobiographer