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Python Geometric Mean & Geometric Mean Rate of Return
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***After completion of this tutorial, I noticed a few ways the function for the geometric mean rate of return could be improved. You will see notes for these improvements placed throughout the tutorial.***
Four Steps To Create Function:
1. convert values (per period returns) to per period return relatives by adding 1 to each value
2. multiply all values together (per period return relatives)
3. compute the nth root of the product
4. subtract 1
# geometric mean rate of return function with changes - see below:
def geomean_return(*numbers):
# set product to 1 outside the for loop
product = 1
for i in numbers:
# pprr is the per period return relative
pprr = i + 1
product *= pprr
decimal_answer = product ** (1/len(numbers))-1
percent_answer = decimal_answer * 100
return 'decimal = {}, percent = {}'.format(decimal_answer, round(percent_answer, 4))
Four Steps To Create Function:
1. convert values (per period returns) to per period return relatives by adding 1 to each value
2. multiply all values together (per period return relatives)
3. compute the nth root of the product
4. subtract 1
# geometric mean rate of return function with changes - see below:
def geomean_return(*numbers):
# set product to 1 outside the for loop
product = 1
for i in numbers:
# pprr is the per period return relative
pprr = i + 1
product *= pprr
decimal_answer = product ** (1/len(numbers))-1
percent_answer = decimal_answer * 100
return 'decimal = {}, percent = {}'.format(decimal_answer, round(percent_answer, 4))
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