Measures of Central Tendency in Returns

Very Hard Statistical Concepts And Returns Measures Of Central Tendency

In a recent study examining the returns of various investment portfolios, a researcher computed the mean, median, and mode of annual returns over a 10-year period. The annual returns are as follows:

4%, 5%, 6%, 6%, 7%, 8%, 9%, 10%, 11%, and 12%.

The researcher identified that the mean return was significantly influenced by the outlying higher returns. Based on this information, which of the following statements is true regarding the measures of central tendency calculated from these returns?

The mean return is greater than the median and less affected by outliers than the mode.

The median return is 7%, the mode is 6%, and the mean does not necessarily have to be greater than the median.

While the mean is significantly high at 8.6%, the mode accurately reflects the most frequently occurring data point.

Hint

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