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Hi! @wannabe1988,
The reason is that if you were counting the dead companies, you would add a zero and divide by such company. For example,
Stock Company #1 Return – 5%
Stock Company #2 Return – 7%
Stock Company #3 Return – 9%
Stock Company #4 Return – 0% (dead company)
Average return with dead company (5+7+9+0)/4=5.25%
Average return without dead company (5+7+9)/3=7.00% – This one is biased upward.
Hope it helps! 😀