They talk in this one about a smoothing rule based on rolling 3 year average returns vs. a geometrically declining average of trailing endowment values. So I gather the rolling 3 year average is simply (assume returns of 3%, 4% and 5%): (3+4+5)/3=4% but what would the geometrically declining average of trailing endowment values look like? Something like 0.6*5% + 0.4*4% + 0.2*3% = 5.2% ?
yes most recent years return are given more weight than previous years. This is to prevent a one off mega return biasing upwards the average payout in future years (well until it drops out)