A portfolio has an arithmetic mean return of 12% and a geometric mean return of 11.3%. Which statement best explains the difference?
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A
The geometric mean is always higher than the arithmetic mean for positive returns
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B
Volatility causes the geometric mean to be lower than the arithmetic mean
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C
The arithmetic mean ignores compounding effects and thus overstates long-run growth
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D
Both means should be identical when returns are normally distributed