Which of the following statements is FALSE? A) The geometric average return is a

Question

Which of the following statements is FALSE? A) The geometric average return is a better description of the long-run historical performance of an investment. B) The geometric average return will always be above the arithmetic average return, and the difference grows with the volatility of the annual returns. C) The compounded geometric average return is most often used for comparative purposes. D) We should use the arithmetic average return when we are trying to estimate an investment's expected return over a future horizon based on its past performance.

Explanation / Answer

B) The geometric average return will always be above the arithmetic average return, and the difference grows with the volatility of the annual returns.

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