Key Financial Market Concepts, 2nd Edition

Mean, Median and Mode

Definition

All these three are in some sense an ‘average’ of a series of numbers.

The arithmetic mean of a series of numbers is their ‘average’ as we normally understand it. It is the total of all the numbers, divided by how many numbers there are.

The median of a series of numbers is the number in the middle of the series.

The mode of a series of numbers is the number that occurs most frequently in the series; there might be more than one mode.

How are they used?

The arithmetic mean (or simply ‘mean’) of a series of numbers is the average of the numbers as we normally understand it. If we have the following 13 numbers:

4, 10, –8, –2, 11, –3, 0, 4, –7, 0, 1, 7, 9

then their mean is:

The mean is useful, because it gives ...