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What is market benchmark?

Updated: 9/18/2023
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13y ago

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A Market Benchmark is a comparative average used when comparing the performance or volatility of a specific financial instrument. The benchmark used will vary depending on the instrument you're comparing.

For example, when looking at the relative performance of stocks, you could use a stock index as the benchmark, such as the S&P500 or the Dow Jones Industrial Average. You could also use a Sector Index (such as the Banking Index) if comparing a bank stock.

The benchmark shows you how all instruments included in the index faired on average. You can then use that as a comparison. For example, if the benchmark index made 10% per annum, and the stock you're comparing made 20% per annum, you could say that the stock out-performed the benchmark 2 to1.

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