I still have problems to exactly understand the difference between geometric and arithmetic mean. I know that e.g. for returns, the arithmetic mean can be wrong (e.g. if I start with 100 $ and if my stock then goes up +10%, and then from 110 it goes down -10%, the mean of the return would be 0, however there is a loss).
So I know the problem lies in the fact, that the arithmetic mean "rewards" volatility. But why is this so. Can you explain in simple words, why the arithmetic mean is not appropriate for the example in brackets and why the geometric mean is the better measure?