benchmark

noun
bench·​mark | \ˈbench-ˌmärk \

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

Keep scrolling for more

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

Turner thinks the research produced after the Yellowstone fires of 1988 can serve as a benchmark for how forests might respond to repeated burning, and the hot and furious future that may await them. Kristen Pope, Discover Magazine, "Wildfire Engulfed Yellowstone 30 Years Ago. Its Recovery Could Predict The Future of the West," 12 Nov. 2018 The Hasselblad X1D is my benchmark for medium format cameras, combining genuinely portable ergonomics with the massive sensor size and resolution that such cameras are known for. Vlad Savov, The Verge, "The Leica S3 is a frustratingly awesome medium format DSLR," 27 Sep. 2018 My benchmark for success was my older brother, who had always been outstanding both academically and at debate. SELF, "How Intuitive Eating Helped Me Stop Counting Calories and Following Impossible Food Rules," 24 Aug. 2018 Since then, the unveiling of each successive new class has become a bona fide media event, complete with a splashy web site featuring graphs and charts detailing the group’s progress toward its diversity benchmarks. Josh Rottenberg, latimes.com, "Motion picture academy’s record-breaking 928 new members a sign of the changing times," 26 June 2018 For its first several years, the E.S.G. index outperformed its peer benchmark. Tim Gray, New York Times, "Finding Emerging Markets Stocks With Social Consciences," 13 Apr. 2018 Burgess said the contract puts Seattle near the middle of pay levels among seven benchmark West Coast cities, and will help with recruitment of new officers and slow the loss of officers leaving for higher salaries and signing bonuses. Steve Miletich, The Seattle Times, "Looming Seattle City Council vote on police labor contract generates political friction right down to the wire," 13 Nov. 2018 While there aren’t any specific benchmarks in terms of new construction or other measures such as reducing carbon emissions, the idea is to create a dialogue around better building and planning practices, according to Budi. Patrick Sisson, Curbed, "Olympics try more city-friendly bid process: Will it work?," 8 Oct. 2018 The number most people are watching is Tesla’s weekly production rate, a squishy figure that Musk has set up as his quarterly benchmark. Fortune, "Tesla's Mad Scramble to Meet Production Deadline Is Coming to an End," 30 June 2018

Recent Examples on the Web: Verb

Japan’s benchmark Nikkei 225 index lost 0.1 percent to 21,785.54 while South Korea’s Kospi added 0.1 percent to 2,273.76. Washington Post, "Asian markets wobble as China-US trade tensions rise," 3 July 2018 Oil from western Canada trades at a large discount to benchmark West Texas intermediate oil because producers in Canada’s oil patch have a difficult time getting their crude to refiners. Russell Gold, WSJ, "Husky Makes Unsolicited Bid to Fellow Canadian Oil Firm MEG," 30 Sep. 2018 Facebook is among a group of tech giants involved in benchmarking the latest AI chips, Aaron Tilley reports. Casey Newton, The Verge, "Facebook beats Twitter at fighting fake news, a new study found," 15 Sep. 2018 Those accounts pay interest at levels related to the Federal Reserve’s benchmark short-term borrowing cost, known as the fed-funds rate, which had been near zero for years. Simon Constable, WSJ, "What’s Driving Bank Stocks?," 8 July 2018 Meanwhile, the energy sub-index of Australia’s benchmark S&P/ASX 200 fell more than 1%, declining for a second day. Joanne Chiu, WSJ, "Energy Shares Detract From Broader Gains in Asian Markets," 12 July 2018 Japan’s benchmark Nikkei 225 index rose less than 0.1 percent while South Korea’s Kospi lost 0.3 percent. Marley Jay, The Seattle Times, "US stocks inch higher a day after sharp losses; GE leaps," 26 June 2018 President Trump likely will lash out at countries spending less on defense than the alliance’s benchmark 2% of gross domestic product. Elisabeth Braw, WSJ, "Europe’s Little Alliances Can Help Bolster NATO," 10 July 2018 Japan’s benchmark Nikkei 225 added 0.7 percent and South Korea’s Kospi gained 0.4 percent. Marley Jay, The Seattle Times, "US stocks climb again as Pepsi leads household goods rally," 10 July 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.

See More

First Known Use of benchmark

Noun

1813, in the meaning defined at sense 2

Verb

1952, in the meaning defined above

Keep scrolling for more

Learn More about benchmark

Statistics for benchmark

Last Updated

7 Dec 2018

Look-up Popularity

Time Traveler for benchmark

The first known use of benchmark was in 1813

See more words from the same year

Keep scrolling for more

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

Keep scrolling for more

Comments on benchmark

What made you want to look up benchmark? Please tell us where you read or heard it (including the quote, if possible).

WORD OF THE DAY

a knickknack or trinket

Get Word of the Day daily email!

Test Your Vocabulary

Find the Cousins

  • a-large-tree-with-many-branches
  • Which pair shares a common word ancestor?
True or False

Test your knowledge - and maybe learn something along the way.

TAKE THE QUIZ
Word Winder's CrossWinder

Test Your Knowledge - and learn some interesting things along the way.

TAKE THE QUIZ

Love words? Need even more definitions?

Subscribe to America's largest dictionary and get thousands more definitions and advanced search—ad free!