Groundlearn / Glossary / Harmonic mean
Harmonic mean
A CFA term, defined in plain English with the distinction examiners test.
What it means
The reciprocal of the average of reciprocals. Used for averaging ratios over a fixed money amount, such as the cost of shares bought at different prices.
The exam angle
Harmonic ≤ geometric ≤ arithmetic, always. Cost averaging is the standard exam application.
Where it appears in the syllabus
- Quantitative MethodsCFA Level I · exam weight 11–14% · Returns and benchmarks, time value, distributions, portfolio maths, regression.
Related terms
- AlphaReturn in excess of what the asset’s risk exposures would predict.
- AnnuityA series of equal cash flows at equal intervals.
- Arithmetic meanThe sum of the observations divided by their number.
- Bayes’ formulaA rule for revising the probability of an event in the light of new information, using how likely that information is…
- BootstrapResampling the observed data with replacement to estimate the sampling distribution of a statistic, without assuming a…
- Capital market lineThe capital allocation line that runs from the risk-free asset to the market portfolio, the steepest available.
Educational content only. This is not financial, investment, legal or regulatory advice. Check the official curriculum for your own exam before relying on any definition here.
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