Average

In colloquial language, an average is a single number taken as representative of a list of numbers. Different concepts of average are used in different contexts. Often "average" refers to the arithmetic mean, the sum of the numbers divided by how many numbers are being averaged. In statistics, mean, median, and mode are all known as measures of central tendency, and in colloquial usage any of these might be called an average value.

Calculation

Pythagorean means

The arithmetic mean, the geometric mean and the harmonic mean are known collectively as the Pythagorean means.

Arithmetic mean

The most common type of average is the arithmetic mean. If n numbers are given, each number denoted by ai, the arithmetic mean is the sum of the as divided by n or
The arithmetic mean, often simply called the mean, of two numbers, such as 2 and 8, is obtained by finding a value A such that 2 + 8 = A + A. One may find that A = /2 = 5. Switching the order of 2 and 8 to read 8 and 2 does not change the resulting value obtained for A. The mean 5 is not less than the minimum 2 nor greater than the maximum 8. If we increase the number of terms in the list to 2, 8, and 11, the arithmetic mean is found by solving for the value of A in the equation 2 + 8 + 11 = A + A + A. One finds that A = /3 = 7.

Geometric mean

The geometric mean of n positive numbers is obtained by multiplying them all together and then taking the nth root. In algebraic terms, the geometric mean of a1, a2, ..., an is defined as
Geometric mean can be thought of as the antilog of the arithmetic mean of the logs of the numbers.
Example: Geometric mean of 2 and 8 is

Harmonic mean

for a non-empty collection of numbers a1, a2, ..., an, all different from 0, is defined as the reciprocal of the arithmetic mean of the reciprocals of the ais:
One example where the harmonic mean is useful is when examining the speed for a number of fixed-distance trips. For example, if the speed for going from point A to B was 60 km/h, and the speed for returning from B to A was 40 km/h, then the harmonic mean speed is given by

Inequality concerning AM, GM, and HM

A well known inequality concerning arithmetic, geometric, and harmonic means for any set of positive numbers is
See Inequality of arithmetic and geometric means.
Thus for the above harmonic mean example: AM = 50, GM ≈ 49, and HM = 48 km/h.

Statistical location

The mode, the median, and the mid-range are often used in addition to the mean as estimates of central tendency in descriptive statistics. These can all be seen as minimizing variation by some measure; see.
 Type Description Example Result Arithmetic mean Sum of values of a data set divided by number of values: / 7 4 Median Middle value separating the greater and lesser halves of a data set 1, 2, 2, 3, 4, 7, 9 3 Mode Most frequent value in a data set 1, 2, 2, 3, 4, 7, 9 2 Mid-range The arithmetic mean of the highest and lowest values of a set / 2 5

Mode

The most frequently occurring number in a list is called the mode. For example, the mode of the list is 3. It may happen that there are two or more numbers which occur equally often and more often than any other number. In this case there is no agreed definition of mode. Some authors say they are all modes and some say there is no mode.

Median

The median is the middle number of the group when they are ranked in order.
Thus to find the median, order the list according to its elements' magnitude and then repeatedly remove the pair consisting of the highest and lowest values until either one or two values are left. If exactly one value is left, it is the median; if two values, the median is the arithmetic mean of these two. This method takes the list 1, 7, 3, 13 and orders it to read 1, 3, 7, 13. Then the 1 and 13 are removed to obtain the list 3, 7. Since there are two elements in this remaining list, the median is their arithmetic mean, /2 = 5.

Mid-range

The mid-range is the arithmetic mean of the highest and lowest values of a set.

Summary of types

 Name Equation or description Arithmetic mean Median The middle value that separates the higher half from the lower half of the data set Geometric median A rotation invariant extension of the median for points in Rn Mode The most frequent value in the data set Geometric mean Harmonic mean Quadratic mean Cubic mean Generalized mean Weighted mean Truncated mean The arithmetic mean of data values after a certain number or proportion of the highest and lowest data values have been discarded Interquartile mean A special case of the truncated mean, using the interquartile range. A special case of the inter-quantile truncated mean, which operates on quantiles that are equidistant but on opposite sides of the median. Midrange Winsorized mean Similar to the truncated mean, but, rather than deleting the extreme values, they are set equal to the largest and smallest values that remain

The table of mathematical symbols explains the symbols used below.

Miscellaneous types

Other more sophisticated averages are: trimean, trimedian, and normalized mean, with their generalizations.
One can create one's own average metric using the generalized f-mean:
where f is any invertible function. The harmonic mean is an example of this using f = 1/x, and the geometric mean is another, using f = log x.
However, this method for generating means is not general enough to capture all averages. A more general method for defining an average takes any function g of a list of arguments that is continuous, strictly increasing in each argument, and symmetric. The average y is then the value that, when replacing each member of the list, results in the same function value: . This most general definition still captures the important property of all averages that the average of a list of identical elements is that element itself. The function provides the arithmetic mean. The function provides the geometric mean. The function provides the harmonic mean.

Average percentage return and CAGR

A type of average used in finance is the average percentage return. It is an example of a geometric mean. When the returns are annual, it is called the Compound Annual Growth Rate. For example, if we are considering a period of two years, and the investment return in the first year is −10% and the return in the second year is +60%, then the average percentage return or CAGR, R, can be obtained by solving the equation:. The value of R that makes this equation true is 0.2, or 20%. This means that the total return over the 2-year period is the same as if there had been 20% growth each year. The order of the years makes no difference – the average percentage returns of +60% and −10% is the same result as that for −10% and +60%.
This method can be generalized to examples in which the periods are not equal. For example, consider a period of a half of a year for which the return is −23% and a period of two and a half years for which the return is +13%. The average percentage return for the combined period is the single year return, R, that is the solution of the following equation:, giving an average return R of 0.0600 or 6.00%.

Moving average

Given a time series such as daily stock market prices or yearly temperatures people often want to create a smoother series. This helps to show underlying trends or perhaps periodic behavior. An easy way to do this is the moving average: one chooses a number n and creates a new series by taking the arithmetic mean of the first n values, then moving forward one place by dropping the oldest value and introducing a new value at the other end of the list, and so on. This is the simplest form of moving average. More complicated forms involve using a weighted average. The weighting can be used to enhance or suppress various periodic behavior and there is very extensive analysis of what weightings to use in the literature on filtering. In digital signal processing the term "moving average" is used even when the sum of the weights is not 1.0. The reason for this is that the analyst is usually interested only in the trend or the periodic behavior.

History

Origin

The first recorded time that the arithmetic mean was extended from 2 to n cases for the use of estimation was in the sixteenth century. From the late sixteenth century onwards, it gradually became a common method to use for reducing errors of measurement in various areas. At the time, astronomers wanted to know a real value from noisy measurement, such as the position of a planet or the diameter of the moon. Using the mean of several measured values, scientists assumed that the errors add up to a relatively small number when compared to the total of all measured values. The method of taking the mean for reducing observation errors was indeed mainly developed in astronomy. A possible precursor to the arithmetic mean is the mid-range, used for example in Arabian astronomy of the ninth to eleventh centuries, but also in metallurgy and navigation.
However, there are various older vague references to the use of the arithmetic mean. In a text from the 4th century, it was written that :
Even older potential references exist. There are records that from about 700 BC, merchants and shippers agreed that damage to the cargo and ship should be shared equally among themselves. This might have been calculated using the average, although there seem to be no direct record of the calculation.

Etymology

The root is found in Arabic as عوار awar, a defect, or anything defective or damaged, including partially spoiled merchandise; and عواري ʿawārī = "of or relating to ʿawār, a state of partial damage". Within the Western languages the word's history begins in medieval sea-commerce on the Mediterranean. 12th and 13th century Genoa Latin avaria meant "damage, loss and non-normal expenses arising in connection with a merchant sea voyage"; and the same meaning for avaria is in Marseille in 1210, Barcelona in 1258 and Florence in the late 13th. 15th-century French avarie had the same meaning, and it begot English "averay" and English "average" with the same meaning. Today, Italian avaria, Catalan avaria and French avarie still have the primary meaning of "damage". The huge transformation of the meaning in English began with the practice in later medieval and early modern Western merchant-marine law contracts under which if the ship met a bad storm and some of the goods had to be thrown overboard to make the ship lighter and safer, then all merchants whose goods were on the ship were to suffer proportionately ; and more generally there was to be proportionate distribution of any avaria. From there the word was adopted by British insurers, creditors, and merchants for talking about their losses as being spread across their whole portfolio of assets and having a mean proportion. Today's meaning developed out of that, and started in the mid-18th century, and started in English. .
Marine damage is either particular average, which is borne only by the owner of the damaged property, or general average, where the owner can claim a proportional contribution from all the parties to the marine venture. The type of calculations used in adjusting general average gave rise to the use of "average" to mean "arithmetic mean".
A second English usage, documented as early as 1674 and sometimes spelled "averish", is as the residue and second growth of field crops, which were considered suited to consumption by draught animals.
There is earlier, unrelated use of the word. It appears to be an old legal term for a tenant's day labour obligation to a sheriff, probably anglicised from "avera" found in the English Domesday Book.
The Oxford English Dictionary, however, says that derivations from German hafen haven, and Arabic ʿawâr loss, damage, have been "quite disposed of" and the word has a Romance origin.