Benchmark Learning Guide
Benchmark is a standard reference used to measure and compare the performance of assets, investment portfolios, or systems. When selecting a reference, ensure that its asset type, geographic region, and risk characteristics match those of the subject being evaluated.
Role in Finance
In finance,Benchmark typically refers to an index representing a particular market condition. Investors can compare the returns of an asset or portfolio with it to determine whether performance is better than, behind, or close to that of the market or comparable investments, and use this comparison to set targets and explain investment results.
How to Select a Benchmark
An effective Benchmark should match the asset type, geographic scope, and risk characteristics of the investment being evaluated. For example, using a large-cap U.S. company index to measure a small-cap growth fund may be misleading because their investment scopes differ and may not accurately reflect the fund’s relative performance.
Computer and Blockchain Contexts
In computer science,benchmarking is the practice of running tests under controlled conditions to compare the speed, efficiency, and reliability of hardware or software. Blockchain systems can likewise be compared by transaction throughput, time to final confirmation, scalability, degree of decentralization, and consensus algorithm efficiency.
Original Tutorial
https://www.binance.com/en/academy/glossary/benchmark
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