Mean, Variance, Standard Deviation and CorrelationWhile making an investment decision, it is important to assess the risk/return profile of any invest...
Lessons
- Descriptive Vs. Inferential Statistics
- Types of Measurement Scales
- Parameter, Sample Statistic, and Frequency Distribution
- Relative Frequencies and Cumulative Relative Frequencies
- Properties of a Data Set (Histogram / Frequency Polygon)
- Measures of Central Tendency
- Calculating Arithmetic Mean
- Calculating Weighted Average Mean
- Calculating Geometric Mean
- Calculating Harmonic Mean
- Calculating Median and Mode of a Data Set
- Quartiles, Quintiles, Deciles, and Percentiles
- Range and Mean Absolute Deviation
- Variance and Standard Deviation
- Chebyshev’s Inequality
- Coefficient of Variation
- Sharpe Ratio
- Skewness and Kurtosis
- Relative Locations of Mean, Median and Mode
Calculating Harmonic Mean
Harmonic mean is calculated by dividing the number of observations (n) by the sum of reciprocals of all observations.
Harmonic mean has some applications in finance. One application is to calculate the average purchase cost of shares purchased over time.
Let’s say that an investor purchased a stock worth $100 for two months. The share price at the time of each purchase was 5 and 7. What will be the average purchase price? We can calculate this as follows.
The number of stocks purchased in the two months are $100/5 = 20 and $100/7 = 14.286. Total number of shares purchased is 34.286 for a total cost of $200. Average purchase price will be = $200/34.286 = 5.833. This is in fact the harmonic mean.
We can use the harmonic mean formula to calculate this.
The relationship between Harmonic Mean, Arithmetic Mean, and Geometric Mean is as given below:
Harmonic Mean < Geometric Mean < Arithmetic Mean
You may find these interesting
Analytical Approach to Calculating VaR (Variance-C...We earlier saw how VaR can be calculated using the parametric method. We will now look at this metho...
Calculating VaR Using Historical SimulationThe fundamental assumption of the Historical Simulations methodology is that you base your results o...
Calculating VaR using Monte Carlo SimulationMonte Carlo Simulations correspond to an algorithm that generates random numbers that are used to co...
CFA Calculator: Financial Calculator for CFA ExamIn order to work with quantitative sections of the study material, it is important that you be able ...
Calculating Net Present Value (NPV) and Internal R...### Net Present Value (NPV) Function
The NPV function calculates the present value of a series of c...
Three Methodologies for Calculating VaRThere are three major methodologies for calculating VaR.
- Parametric
- Monte Carlo
- Histori...
Statistical Foundations: Mean and Standard Deviati...Many financial calculations and estimations require a statistical analysis of the variability of pas...
How to Calculate Earnings Before Interest and Tax ...This video will show you how to use the EBIT calculating system to figure out what a company's profi...
Calculating the Macaulay Duration Using ExcelThis video takes a simple example and demonstrates how the duration of the bond is calculated using ...
Related Downloads
Related Quizzes
Finance Train Premium
Accelerate your finance career with cutting-edge data skills.
Join Finance Train Premium for unlimited access to a growing library of ebooks, projects and code examples covering financial modeling, data analysis, data science, machine learning, algorithmic trading strategies, and more applied to real-world finance scenarios.
I WANT TO JOINJOIN 30,000 DATA PROFESSIONALS
Free Guides - Getting Started with R and Python
Enter your name and email address below and we will email you the guides for R programming and Python.
