Arithmetic Mean Return

An average that is calculated by adding the value of the points in a data set and then dividing the sum by the number of data points, such as if one wishes to calculate the average income of a country with exactly five people in it, and their incomes are $25,000, $26,000, $43,000, $70,000 and $72,000. In this case, all five of the incomes would be added and then the total would be divided by 5 in order to get the arithmetic mean return. This return, however, can be overly affected by extremes in either direction.

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