Benchmark error

(redirected from Benchmark Errors)

Benchmark error

Use of an inappropriate proxy for the true market portfolio.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Benchmark Error

The act of using the wrong benchmark when creating a market portfolio in the capital asset pricing model or a similar model. For example, when calculating a CAPM using European stocks, a benchmark error would involve using the Dow Jones Industrial Average (an American index) as the benchmark. A benchmark error can result in wildly incorrect calculations.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved