APPLICATION

1. GOLDEN MEAN (in pdf named GM)

2. Geometric Means for Water Quality Standards (in
pdf 3413)
3. Financial Return Calculation (in 3413)
4. Usages
In social sciences, we frequently encounter this in a number of ways. For
example, the human population growth is expressed as a percentage, and
thus when population growth needs to be averaged, it is the geometric mean
that is most relevant.

In surveys and studies too, the geometric mean becomes relevant. For
example, if a survey found that over the years, the economic status of a poor
neighborhood is getting better, they need to quote the geometric mean of the
development, averaged over the years in which the survey was conducted.
The arithmetic mean will not make sense in this case either.

In economics, we see the percentage growth in interest accumulation. Thus if
you are starting out with a sum of money that is compounded for interest, then
the mean that you should look for is the geometric mean. Many such financial
instruments like bonds yield a fixed percentage return, and while quoting their
average return, it is the geometric mean that should be quoted.

5. Source: Wikipedia
Applications[edit]
Proportional growth[edit]
Further information: Compound annual growth rate
The geometric mean is more appropriate than the arithmetic mean for describing
proportional growth, both exponential growth (constant proportional growth) and
varying growth; in business the geometric mean of growth rates is known as
the compound annual growth rate (CAGR). The geometric mean of growth over
periods yields the equivalent constant growth rate that would yield the same final
amount.
Suppose an orange tree yields 100 oranges one year and then 180, 210 and 300 the
following years, so the growth is 80%, 16.6666% and 42.8571% for each year
respectively. Using the arithmetic mean calculates a (linear) average growth of
46.5079% (80% + 16.6666% + 42.8571% divided by 3). However, if we start with
100 oranges and let it grow 46.5079% each year, the result is 314 oranges, not 300,
so the linear average over-states the year-on-year growth.
Instead, we can use the geometric mean. Growing with 80% corresponds to
multiplying with 1.80, so we take the geometric mean of 1.80, 1.166666 and
1.428571, i.e. ; thus the "average"
growth per year is 44.2249%. If we start with 100 oranges and let the number grow
with 44.2249% each year, the result is 300 oranges.
Applications in the social sciences[edit]
Although the geometric mean has been relatively rare in computing social
statistics, starting from 2010 the United Nations Human Development Index did
switch to this mode of calculation, on the grounds that it better reflected the non-
substitutable nature of the statistics being compiled and compared:
The geometric mean decreases the level of substitutability between
dimensions [being compared] and at the same time ensures that a 1
percent decline in say life expectancy at birth has the same impact on the
HDI as a 1 percent decline in education or income. Thus, as a basis for
comparisons of achievements, this method is also more respectful of the
intrinsic differences across the dimensions than a simple average.
[5]

Note that not all values used to compute the HDI are normalized; some of them
instead have the form . This makes the choice of
the geometric mean less obvious than one would expect from the "Properties"
section above.
Aspect ratios[edit]


Equal area comparison of the aspect ratios used by Kerns Powers to derive
the SMPTE 16:9 standard.
[6]
TV 4:3/1.33 in red, 1.66 in orange,16:9/1.77 in
blue, 1.85 in yellow,Panavision/2.2 in mauve andCinemaScope/2.35 in purple.
The geometric mean has been used in choosing a compromise aspect ratio in film
and video: given two aspect ratios, the geometric mean of them provides a
compromise between them, distorting or cropping both in some sense equally.
Concretely, two equal area rectangles (with the same center and parallel sides) of
different aspect ratios intersect in a rectangle whose aspect ratio is the geometric
mean, and their hull (smallest rectangle which contains both of them) likewise has
aspect ratio their geometric mean.
In the choice of 16:9 aspect ratio by the SMPTE, balancing 2.35 and 4:3, the
geometric mean is , and thus ... was
chosen. This was discovered empirically by Kerns Powers, who cut out rectangles
with equal areas and shaped them to match each of the popular aspect ratios. When
overlapped with their center points aligned, he found that all of those aspect ratio
rectangles fit within an outer rectangle with an aspect ratio of 1.77:1 and all of
them also covered a smaller common inner rectangle with the same aspect ratio
1.77:1.
[6]
The value found by Powers is exactly the geometric mean of the extreme
aspect ratios, 4:3 (1.33:1) and CinemaScope (2.35:1), which is coincidentally close
to ( ). Note that the intermediate ratios have no effect on the result,
only the two extreme ratios.
Applying the same geometric mean technique to 16:9 and 4:3 approximately yields
the 14:9 ( ...) aspect ratio, which is likewise used as a compromise between
these ratios.
[7]
In this case 14:9 is exactly the arithmetic mean of
and , since 14 is the average of 16 and 12, while the
precisegeometric mean is but the two
different means, arithmetic and geometric, are approximately equal because both
numbers are sufficiently close to each other (a difference of less than 2%).
Anti-reflective coatings[edit]
In optical coatings, where reflection needs to be minimised between two media of
refractive indices n
0
and n
2
, the optimum refractive index n
1
of the anti-reflective
coating is given by the geometric mean: .
Spectral flatness[edit]
In signal processing, spectral flatness, a measure of how flat or spiky a spectrum is,
is defined as the ratio of the geometric mean of the power spectrum to its
arithmetic mean.
Geometry[edit]
In the case of a right triangle, its altitude is the length of a line extending
perpendicularly from the hypotenuse to its 90 vertex. Imagining that this line
splits the hypotenuse into two segments, the geometric mean of these segment
lengths is the length of the altitude.
In an ellipse, the semi-minor axis is the geometric mean of the maximum and
minimum distances of the ellipse from a focus; and the semi-major axis of the
ellipse is the geometric mean of the distance from the center to either focus and the
distance from the center to either directrix.
Financial[edit]
The geometric mean has from time to time been used to calculate financial indices
(the averaging is over the components of the index). For example in the past the FT
30 index used a geometric mean.
[8]
It is also used in the recently introduced "RPIJ"
measure of inflation in the United Kingdom and elsewhere in the European Union.
As Rowley states, this has the effect of understating movements in the index
compared to using the arithmetic mean. As Rowley explains, there are
circumstances where this is undesirable, for example in measuring cost of living
changes, where it is undesirable to "damp down" large changes in some of the
index components.
6.