Financial Terms
Benchmark error

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Definition of Benchmark error

Benchmark Error Image 1

Benchmark error

Use of an inappropriate proxy for the true market portfolio.

Related Terms:


The performance of a predetermined set of securities, for comparison purposes. Such sets may be
based on published indexes or may be customized to suit an investment strategy.

Benchmark interest rate

Also called the base interest rate, it is the minimum interest rate investors will
demand for investing in a non-Treasury security. It is also tied to the yield to maturity offered on a
comparable-maturity Treasury security that was most recently issued ("on-the-run").

Benchmark issues

Also called on-the-run or current coupon issues or bellwether issues. In the secondary
market, it's the most recently auctioned Treasury issues for each maturity.

Customized benchmarks

A benchmark that is designed to meet a client's requirements and long-term

Measurement error

errors in measuring an explanatory variable in a regression that leads to biases in
estimated parameters.

Net errors and omissions

In balance of payments accounting, net errors and omissions record the statistical
discrepancies that arise in gathering balance of payments data.

Posttrade benchmarks

Prices after the decision to trade.

Benchmark Error Image 2

Pre-trade benchmarks

Prices occurring before or at the decision to trade.

Sharpe benchmark

A statistically created benchmark that adjusts for a managers' index-like tendencies.

Standard error

In statistics, a measure of the possible error in an estimate.

Tracking error

In an indexing strategy, the difference between the performance of the benchmark and the
replicating portfolio.


A standard by which something may be compared and measured


the process of investigating how others do something better so that the investigating company can imitate,
and possibly improve upon, their techniques

process benchmarking

benchmarking that focuses on practices and how the best-in-class companies achieved their results

results benchmarking

benchmarking in which an end product or service is examined; the focus is on product/service specifications and performance results

standard error of the estimate

a measure of dispersion that reflects the average difference between actual observations and expected results provided by a regression line

Accounting Errors

Unintentional mistakes in financial statements. Accounted for by restating
the prior-year financial statements that are in error.

Errors and Omissions Insurance

Insurance coverage purchased by the agent/broker which provides protection against loss incurred by a client because of some negligent act, error, oversight, or omission by the agent/broker.







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