What Is Benchmark? Meaning & Example
Definition
A benchmark is a standard, often a market index, used to measure an investment's performance. Comparing with a suitable benchmark shows whether a strategy added value.
Related terms
A market index tracks the performance of a selected group of securities to represent part of the market. Indexes are used as benchmarks and as the basis for index funds.
AlphaAlpha is the return an investment earns above or below what would be expected given its risk relative to a benchmark. Positive alpha suggests outperformance after adjusting for risk.
BetaBeta measures how much an investment tends to move relative to the overall market. A beta above 1 means it usually swings more than the market, below 1 means less.
What is Benchmark?
A benchmark is a standard, often a market index, used to measure an investment's performance. Comparing with a suitable benchmark shows whether a strategy added value.
Can you give an example of Benchmark?
A large-company stock fund is often compared with a broad large-company stock index.