What’s the difference between the arithmetic and geometric means?

The arithmetic mean is the most commonly used type of mean and is often referred to simply as “the mean.” While the arithmetic mean is based on adding and dividing values, the geometric mean multiplies and finds the root of values.

Even though the geometric mean is a less common measure of central tendency, it’s more accurate than the arithmetic mean for percentage change and positively skewed data. The geometric mean is often reported for financial indices and population growth rates.