benchmark

noun
bench·​mark | \ ˈbench-ˌmärk How to pronounce benchmark (audio) \

Definition of benchmark

 (Entry 1 of 2)

1a : something that serves as a standard by which others may be measured or judged a stock whose performance is a benchmark against which other stocks can be measured
b : a point of reference from which measurements may be made
c : a standardized problem or test that serves as a basis for evaluation or comparison (as of computer system performance)
2 usually bench mark : a mark on a permanent object (such as a concrete post set into the ground) indicating elevation and serving as a reference in topographic surveys and tidal observations

benchmark

verb
benchmarked; benchmarking; benchmarks

Definition of benchmark (Entry 2 of 2)

transitive verb

business : to study (something, such as a competitor's product or business practices) in order to improve the performance of one's own company

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Examples of benchmark in a Sentence

Noun

a stock whose performance is a benchmark against which other stocks can be measured this prize-winning biography will be the benchmark against which all others will be judged in future years

Recent Examples on the Web: Noun

West Texas Intermediate, the U.S. benchmark, rose $5.30, or 9.7%, to $60.15 a barrel. Washington Post, "The Latest: Saudis to invite global experts to investigate," 18 Sep. 2019 Futures of Brent crude, the global benchmark, also fell 0.3% to $64.28 a barrel on Wednesday. Laura He, CNN, "Asian markets rise slightly ahead of the Federal Reserve's rate decision," 17 Sep. 2019 At 7pm London time Brent, the leading international benchmark, was 14.7% up, at $69.09 per barrel. The Economist, "The drone strikes in Saudi Arabia spook oil markets," 16 Sep. 2019 West Texas crude, the U.S. benchmark, increased by about 8%. Tara Law, Time, "'Locked and Loaded,' the U.S. Blames Iran for a Drone Attack Against Saudi Arabia. Here's What to Know," 16 Sep. 2019 The Fed’s benchmark rate is only 2-2.25%, versus more than 5% before the last recession began. John Detrixhe, Quartz, "Low interest rates could be a “Blockbuster Video moment” for the world’s biggest banks," 3 Sep. 2019 Knox and Mummalo say a better way to look for racial bias in police shootings is to compare incident rates to a benchmark, such as population or crime rates. Juanita Bawagan, Science | AAAS, "Study that claims white police no more likely to shoot minorities draws fire," 15 Aug. 2019 All the major indices, the benchmark Dow Jones, S&P 500 and Nasdaq Composite, fell over 2 percent after the markets opened Monday. NBC News, "Markets tumble over 2 percent as China trade war escalates," 5 Aug. 2019 The last time the Fed actually reduced short term interest rates was December 2008 when the benchmark rate was lowered to nearly zero as part of an ongoing struggle to lift the economy out of the Great Recession. Susan Tompor, Detroit Free Press, "Interest rates cut for first time since 2008: What it means for you," 31 July 2019

Recent Examples on the Web: Verb

Again, Android runs off the SD card, so running a storage benchmark would just benchmark my SD card. Ron Amadeo, Ars Technica, "Turning the Nintendo Switch into Android’s best gaming hardware," 15 Aug. 2019 In Asia, Hong Kong’s Hang Seng and Japan’s benchmark Nikkei 225 closed lower. Alex Veiga, USA TODAY, "Stocks climbing after Trump says he's willing to reopen US-China trade talks," 26 Aug. 2019 In Asia, Japan’s benchmark Nikkei 225 fell 0.3 percent while South Korea’s Kospi slipped 0.5 percent. Marley Jay, The Seattle Times, "Stocks gain after midterms as tech, health care, energy rise," 7 Nov. 2018 In Asia, Japan’s benchmark Nikkei 225 rose 0.7% to finish at 20,563.16. Washington Post, "Global shares rise as investors watch trade war, economies," 20 Aug. 2019 Other valuable types of data identified by these executives included information on brand and corporate reputation, actionable information on potential business threats, supply chain data, and benchmarking data on competitors. Angus Loten, WSJ, "AI Efforts at Large Companies May Be Hindered by Poor Quality Data," 4 Mar. 2019 Investor relief at the cease-fire sent shares of the company up more than 4% on the day, which benchmark stock indexes also jumped. Rachel Layne, CBS News, "Apple lifted by delay in U.S. tariffs on electronics made in China," 13 Aug. 2019 Policymakers wrestling with the value of an individual’s data face a fundamental problem: While data often gets compared to oil, there’s no equivalent to benchmark crude for bits and bytes. Gregory Barber, WIRED, "Senators Want Facebook to Put a Price on Your Data. Is That Possible?," 26 June 2019 After sharp losses the day before, Japan’s benchmark Nikkei 225 index rebounded 1.2 percent and South Korea’s Kospi gained 1 percent. Washington Post, "Tech companies lead US stocks higher as trade fears ease," 20 June 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'benchmark.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of benchmark

Noun

1813, in the meaning defined at sense 2

Verb

1952, in the meaning defined above

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Statistics for benchmark

Last Updated

12 Oct 2019

Look-up Popularity

Time Traveler for benchmark

The first known use of benchmark was in 1813

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More Definitions for benchmark

benchmark

noun

Financial Definition of benchmark

What It Is

A benchmark is a feasible alternative to a portfolio against which performance is measured.

How It Works

Let's assume you compare the returns of your stock portfolio, which is a broadly diversified collection of small-cap stocks and is managed by Company XYZ, with the Russell 2000 index, which you feel is an accurate universe of feasible alternative investments. If Company XYZ's portfolio returns 5.5% in a year but the Russell 2000 (the benchmark) returns 5.0%, then we would say that your portfolio beat its benchmark.

Benchmarks help an investor communicate his or her wishes to a portfolio manager. By assigning the manager a benchmark with which to compare the portfolio's performance, the portfolio manager will make investment decisions with the eci's performance in mind.

The most commonly used benchmarks are market indexes such as the Dow Jones Industrial Average, the S&P 500, or the Russell 2000. However, there are dozens of other market indexes out there that focus on specific industry sectors, security classes, or other market segments. Investors also use other portfolios, mutual funds, or even pooled accounts to construct benchmarks. LIBOR is one of the most widely used benchmarks for short-term interest rates, and the Fed controls another common interest benchmark known as the Fed Funds rate.

A good benchmark should appropriately reflect the portfolio's investment style and strategy as well as the investor's return expectations. For example, the Russell 2000 may be an appropriate benchmark for a portfolio investing exclusively in small-cap domestic stocks, but it may be inappropriate for a portfolio investing in bonds and international REITs. Comparing a portfolio to an inappropriate benchmark could yield misleading information. The portfolio may look fantastic compared to one benchmark but lag considerably behind another. It is difficult to benchmark some portfolios effectively, especially real estate portfolios, where each asset is unique. Further, it is important to compare a portfolio with its benchmark over a long period of time.

Portfolio managers vary in their benchmark strategies. For example, passive managers seek to replicate their benchmarks. This is the strategy behind index mutual funds, which replicate broad market indexes or indexes of securities with special characteristics. Actively managed portfolios on the other hand, seek to beat benchmark returns but generally require added risk and expertise to do so.

Venture capitals frequently receive incentive fees if their portfolios exceed the benchmark return. However, it is important to structure these incentives in a manner that does not motivate a manager to unduly increase the portfolio's risk.

Why It Matters

Comparing a portfolio's returns to a benchmark is a way to measure a portfolio manager's skill. It answers the question, "What value was added by the manager's decisions." The difference in the portfolio and benchmark returns, called tracking error, quantifies this. Tracking error gives investors a sense of how "tight" the portfolio in question is around its benchmark or how volatile the portfolio is relative to its benchmark. As a result, benchmarks not only measure returns, they help measure risk and help the investor determine whether the added return adequately compensates for the risk involved.

Benchmarking lies at the heart of the controversy between passive and active management. Passive managers often note that active managers frequently fail to match or beat their benchmarks, and they question the reliability of active managers' methods for recognizing and predicting trends. Many passive managers espouse the efficient market hypothesis, which says that stock prices are random and already reflect all available information (thus concluding that it is impossible to always beat a benchmark).

Regardless, active managers who have beaten market benchmarks often enjoy a large and loyal following among investors. However, consistently beating those benchmarks remains a big challenge as does defining what benchmark they should beat in the first place.

Source: Investing Answers

benchmark

noun

English Language Learners Definition of benchmark

: something that can be used as a way to judge the quality or level of other, similar things

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