Would you consider using the harmonic mean?

professional profile

September 15, 2022

by a professional from University of Pennsylvania - The Wharton School in Sydney NSW, Australia

Recently I attended a conference where the use of the harmonic mean was considered superior to others like geometric averages, arithmetic averages etc. What do you think? and when would you consider using it?

0
4
57
Replies
4
commentor profile
Reply by a searcher
in San Francisco, CA, USA
Hi Tom, this is late, but I hope not too late - I deal with HM and GM all day long, so my context should be useful.

We us HM to show the weighted average of the portfolio's PE as opposed to the AM, because the AM is very heavily affected by outliers. The HM won't be as biased/pulled towards the extremes due to outlier PEs and it's a saner metric.

Normally, HM would be used when we are trying to average out any metric whose denominator is the more sensitive part.

We still us AM to showcase the impact of outliers on our portfolio's average.
commentor profile
Reply by a searcher
from University of Toronto in Toronto, ON, Canada
Perhaps if you need to debate the form of average used in calculations the deal is not good enough
commentor profile
+2 more replies.
Join the discussion