Different averages for different data
The ordinary average, the arithmetic mean, is not always the right one. When values multiply, or when you average rates, the geometric or harmonic mean gives the correct answer.
The formulas
For n positive values x₁, …, xₙ:
- Arithmetic mean = (x₁ + … + xₙ) ÷ n
- Geometric mean = (x₁ × … × xₙ)^(1/n)
- Harmonic mean = n ÷ (1/x₁ + … + 1/xₙ)
- Quadratic mean (root mean square) = √[(x₁² + … + xₙ²) ÷ n]
Worked example
For the values 2, 8 and 32:
- Arithmetic mean: (2 + 8 + 32) ÷ 3 = 14.
- Geometric mean: (2 × 8 × 32)^(1/3) = 512^(1/3) = 8.
- Harmonic mean: 3 ÷ (0.5 + 0.125 + 0.03125) ≈ 4.57.
- Quadratic mean: √[(4 + 64 + 1,024) ÷ 3] ≈ 19.08.
The four always come in this order for positive values that are not all equal: harmonic ≤ geometric ≤ arithmetic ≤ quadratic.
When to use the geometric mean
Growth rates and returns. An investment gains 50% one year and loses 50% the next. The arithmetic mean of returns is 0%, but $100 becomes $150 then $75: you lost money. Using growth factors 1.5 and 0.5, the geometric mean is √(1.5 × 0.5) ≈ 0.866, a true average return of −13.4% a year. Enter growth factors (1 + return), not percentages, which can be negative.
Other uses: averaging ratios and indexes, combining scores on different scales, and the average in the Human Development Index.
When to use the harmonic mean
Rates over equal amounts. You drive 60 km at 30 km/h and 60 km back at 60 km/h. The average speed is not 45 km/h: the trip takes 2 + 1 = 3 hours for 120 km, so 40 km/h, the harmonic mean of 30 and 60.
Other uses: averaging price-to-earnings ratios across a portfolio with equal investments, the F1 score in machine learning, and resistors in parallel.
When to use the quadratic mean
The root mean square gives more weight to large values. It is used for alternating current (the 120 V or 230 V of mains power is an RMS value), for errors in forecasting (RMSE) and for noise levels.
Limits
The geometric and harmonic means require positive values. A single zero makes the geometric mean zero and the harmonic mean undefined.