# Thread: arithmetic and geometric return....

1. ## arithmetic and geometric return....

a stock has had the following year-end prices and dividends:

year price Dividend
1 $43.42 -- 2$46.21 $0.52 3$52.72 $0.61 4$47.56 $0.61 5$58.83 $0.74 6$70.55 \$0.82

How would I incorporate the dividends to find the arithmetic and geometric return of the stock?

2. I would assume for arithmetic you would simply add up the dividends and divide by the number of years in which dividends were paid.

$\frac {.52 + .61 + .61 + .74 + .82}{5}$

As for the geometric return of the stock you take the percentage gain for each year, multiply them, and take that amount to the power of $\frac {1}{(the number of items in the series)}$, all minus 1.

Really great explanation here, What is the difference between arithmetic and geometric averages?