An adjusted version of the return on equity measure of company profitability, in which the denominator, shareholders' equity, is changed to average shareholders' equity. Typically, return on average equity refers to a company's performance over a fiscal year, so the average-equity denominator is usually computed as the sum of the equity value at the beginning and end of the year, divided by two.
Taobiz explains Return On Average Equity - ROAE
A measure of return on average equity can give a more accurate depiction of a company's corporate profitability, especially in instances where the value of the shareholders' equity has changed considerably during a fiscal year. In situations where the shareholders' equity does not change or changes by very little during a fiscal year, the ROE and ROAE numbers should be identical, or at least similar.
