3 ms·

Yes they are. They are expectations of interest rates, as I said. Ensemble averages of interest rates are plenty meaningful.

by darawk 6y ago

ttoinou 6y ago
Meaningful how ? If product A grows by 20% and product B grows by 50%, what are you going to do with 1.2 and 1.5 exactly ? (1.2+1.5)/2 has what meaning ?
- darawk 6y ago
  In your specific example, the company is very interested in the ensemble average of their products growth rates, because that represents their rolled up revenue growth rate at a point in time (weighted by sales of each, of course). An alternate example is the ensemble average of all corporate bonds in a particular ETF. People who hold that ETF are very interested in this number, because it represents the interest rate that they're earning when they hold that basket of bonds. In both examples they are also interested in the geometric (time averaged) growth rate as well, because that represents their steady state earnings over time. What they really care about, in both examples, is the time-averaged rate of the ensemble rates.
  - ttoinou 6y ago
    > weighted by sales of each, of course So you are averaging amounts of money, so you are averaging things that can be added and you are not averaging interest rates. So you're not doing what you think you were doing and everything is good. (1.2+1.5)/2 doesn't have a meaning but (1.2moneyA+1.5moneyB)/2=moneyAB and growth rate has nothing to do here > because it represents the interest rate that they're earning when they hold that basket of bonds No it doesn't. Look at my example, you would think that the arithmetic average growth rate is 1.35. But now if I told you product A is in fact made up of two subproducts, one is not growing (1) and the others is growing a lot (2), you would compute a new average of (1+2+1.5)/3=1.5
    - darawk 6y ago
      > So you are averaging amounts of money, so you are averaging things that can be added and you are not averaging interest rates. So you're not doing what you think you were doing and everything is good. (1.2+1.5)/2 doesn't have a meaning but (1.2moneyA+1.5moneyB)/2=moneyAB and growth rate has nothing to do here You're taking a weighted average of interest rates. You can call it an amount of money if you like, but you can also call it a weighted average of interest rates. This is no different from a weighted average of time-varying interest rates over irregular intervals of time.

Yes they are. They are expectations of interest rates, as I said. Ensemble averages of interest rates are plenty meaningful.

by darawk 6y ago

Yes they are. They are expectations of interest rates, as I said. Ensemble averages of interest rates are plenty meaningful.

ttoinou 6y ago

Meaningful how ? If product A grows by 20% and product B grows by 50%, what are you going to do with 1.2 and 1.5 exactly ? (1.2+1.5)/2 has what meaning ?

darawk 6y ago
In your specific example, the company is very interested in the ensemble average of their products growth rates, because that represents their rolled up revenue growth rate at a point in time (weighted by sales of each, of course). An alternate example is the ensemble average of all corporate bonds in a particular ETF. People who hold that ETF are very interested in this number, because it represents the interest rate that they're earning when they hold that basket of bonds. In both examples they are also interested in the geometric (time averaged) growth rate as well, because that represents their steady state earnings over time. What they really care about, in both examples, is the time-averaged rate of the ensemble rates.
- ttoinou 6y ago
  > weighted by sales of each, of course So you are averaging amounts of money, so you are averaging things that can be added and you are not averaging interest rates. So you're not doing what you think you were doing and everything is good. (1.2+1.5)/2 doesn't have a meaning but (1.2moneyA+1.5moneyB)/2=moneyAB and growth rate has nothing to do here > because it represents the interest rate that they're earning when they hold that basket of bonds No it doesn't. Look at my example, you would think that the arithmetic average growth rate is 1.35. But now if I told you product A is in fact made up of two subproducts, one is not growing (1) and the others is growing a lot (2), you would compute a new average of (1+2+1.5)/3=1.5
  - darawk 6y ago
    > So you are averaging amounts of money, so you are averaging things that can be added and you are not averaging interest rates. So you're not doing what you think you were doing and everything is good. (1.2+1.5)/2 doesn't have a meaning but (1.2moneyA+1.5moneyB)/2=moneyAB and growth rate has nothing to do here You're taking a weighted average of interest rates. You can call it an amount of money if you like, but you can also call it a weighted average of interest rates. This is no different from a weighted average of time-varying interest rates over irregular intervals of time.