Harmonic is used to compute for average cost of shares purchased over time.
Isn’t average cost of shares purchased over time similar to average price per share?.. therefore, why not use arithmetic mean?
You would use the arithmetic mean if you bought the same number of shares each time.
You use the harmonic mean when you buy the same dollar amount in shares each time: more low-priced shares and fewer high-priced shares.
You could use a weighted (arithmetic) average to compute the average price per share, but the harmonic mean is arguably quicker.
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Arithmetic mean: Harmonic mean … same number of shares: same dollar amount in shares.
Got it! Thanks again!
My pleasure.