1. For Windows or Linux - Press Ctrl+D
2. For MacOS - Press Cmd+D
3. For iPhone (Safari) - Touch and hold, then tap Add Bookmark
4. For Google Chrome - Press 3 dots on top right, then press the star sign
Enter your set of numbers in the input field. Numbers must be separated by commas.
Press Enter on the keyboard or on the arrow to the right of the input field.
In the pop-up window, select “Find the Weighted Mean”. You can also use the search.
The concept of a weighted average or weighted mean value repeatedly appears in portfolio analysis. In the arithmetic mean value, all observations are equally weighted with a coefficient of 1/n. When working with securities portfolios, we need a more general concept of a weighted average, which allows us to use different weights for different observations. To illustrate the concept of weighted average, imagine that an investment manager who manages a capital of $ 100 million can invest $ 70 million in shares and $ 30 million in bonds. The portfolio has a weight of 0.70 per share and 0.30 per bond. How to calculate the return on this investment portfolio? Portfolio return clearly implies averaging of returns on investments in stocks and bonds. However, the value that we calculate should reflect the fact that stocks have a 70 percent weight in the portfolio and bonds have a 30 percent weight.
To reflect this weighting, you need to multiply the return on investment in stocks by 0.70 and the return on investment in bonds by 0.30, and then summarize the two results. This amount is an example of a weighted average. It would be wrong to take the arithmetic mean of the return on investment in stocks and bonds, tantamount to weighing the return on these two classes of assets.