Use of avg v geo mean for covariance calc

CFA Level I
#1

This is a sample exam question. The question gave Geometric Mean Arithmetic Mean Standard Deviation Risk Free Rate. It asked for the coefficiency of variation and the sharpe ratio. The mean was said to be based on historic returns. Based on that fact, I assumed that the geometric mean would have been the superior return metric to use. However, the answer used arithmetic mean. (Fortunately, you we able to figure this out because of the options that were listed). However, is there a rule that coefficient of variation and sharpe ratio both use arithmetic and not geometric averages?!

#2

i think there was a recent thread about this… i’ve always used artih mean. if there is a rule, indeed, i’d love to know…

#3

any statistical measure that uses the sample mean Xbar requires the arithmetic mean

#4

always use arithmetic mean for statistical tests accept when doing a time weighted return.

#5

Thanks. Good to know. Wasted valuable testing seconds with the process of elimination on that one!

#6

use AM ,not GM boom