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


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


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

The Fed has raised its benchmark short-term rate twice this year, most recently in June to a range between 1.75% and 2%, and officials last month penciled in two more rate increases this year and three more next year. Nick Timiraos, WSJ, "Federal Reserve Report Defends Use of New Tools to Set Interest Rates," 13 July 2018 Powell’s remarks at a central banking forum come just a week after the Fed raised its benchmark short-term rate for the second time this year. Christopher A. Rugaber,, "Fed chair signals gradual rate hikes in tame inflation era," 20 June 2018 Against all that, the cushion between the Fed’s benchmark rate and zero, at less than two percentage points, is thin indeed. The Economist, "Rate rises affect global markets—and may feed back to America," 14 June 2018 Wednesday’s rate increase was the second this year and the seventh since the end of the Great Recession and brings the Fed’s benchmark rate to a range of 1.75 to 2 percent. New York Times, "Fed Raises Interest Rates and Signals 2 More Increases Are Coming," 13 June 2018 This is the first quarter since Q4 of 2013 that numbers have dipped below that benchmark. Shannon Liao, The Verge, "China’s smartphone market saw its biggest drop in demand since 2013," 26 Apr. 2018 Still, the Fed anticipates raising benchmark rates at least two more times this year, and even a small increase in rates can affect affordability, Meyer said. Randy Tucker,, "Cincinnati's hot housing market: Five things you need to know," 24 Apr. 2018 Let the Warriors find their internal benchmarks to compete against. Al Saracevic, San Francisco Chronicle, "Team contrition: Warriors blame themselves for rare playoff loss," 23 Apr. 2018 San Diego’s climate action plan, which was adopted in 2015, commits the city to slashing its greenhouse gas emissions 15 percent below 2010 levels by 2020 and 50 percent below that benchmark by 2035. David Garrick,, "San Diego's climate action plan puts hitch in marijuana supply chain," 7 Apr. 2018

Recent Examples on the Web: Verb

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 Japan’s benchmark Nikkei 225 lost 0.3 percent and South Korea’s Kospi fell almost 0.1 percent. Washington Post, "US stocks sink on trade concerns; China pork duty hits Tyson," 2 Apr. 2018 The Fed’s rate-setting committee unanimously agreed earlier in June to lift the central bank’s benchmark short-term rate for the second time this year, to a range between 1.75% and 2%, and officials penciled in two more rate increases this year. Nick Timiraos, WSJ, "Powell to Testify Before Senate on July 17," 28 June 2018 One aim is to create a framework within which to classify the sorts of activities that qualify as sustainable investments, and against which to benchmark existing standards. The Economist, "The EU wants to make finance more environmentally friendly," 22 Mar. 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


1813, in the meaning defined at sense 2


1952, in the meaning defined above

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Statistics for benchmark

Last Updated

9 Nov 2018

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Time Traveler for benchmark

The first known use of benchmark was in 1813

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More Definitions for benchmark



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



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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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).


playful or foolish behavior

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