Also found in: Dictionary, Thesaurus, Medical, Legal, Idioms, Encyclopedia.
Related to averaging: signal averaging, Averaging Down


Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Arithmetic Mean Average

An average calculated by adding the value of the points in a data set and dividing the sum by the number of data points. For example, suppose one wishes to calculate the average income of a country with exactly five people in it, and their incomes are $25,000, $26,000, $43,000, $70,000, and $72,000. It is calculated as:

($25,000 + $26,000 + $43,000 + $70,000 + $72,000) / 5 = $47,200.

A limitation to the arithmetic mean average is that it can be overly affected by extremes in either direction. For example, if one of the five persons in the country earns $100 billion per year, the arithmetic mean average income would be in the billions and would not accurately count the other four citizens. For this reason, many analysts use the median in conjunction with the arithmetic mean average. The arithmetic mean average is also called simply the mean.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
Large Ballet had an even bigger increase in private support, averaging over $2,800,000 per company more than in 1991.
Given the fact that the price of a security always fluctuates, dollar-cost averaging guarantees that your cost basis will always be lower than the average price per share.
That is why most financial advisors often recommend "dollar-cost averaging." This money-management strategy is considered ideal for investors seeking long-term capital growth.
Co-op prices in Westchester County have also continued to rise over the past few years, with the 2002 sale price averaging $128,202, representing a nearly 20% increase from 2001.
First-time home buyers reported household incomes averaging $57,200 - up 6.3 percent from 1997 ($53,800).