Benchmark error

Benchmark error

Use of an inappropriate proxy for the true market portfolio.

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.
References in periodicals archive ?
The difference between the previously published sample-based estimate and the benchmark level is called the benchmark error or the benchmark revision.
CES assumes the total benchmark error accumulated at a steady rate since the prior year's March benchmarked employment, resulting in a linear application (or wedge) of that error to the prior April.
The desegregation of benchmark error into the amounts stemming from three major sources: business births, deaths, and continuing units.