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CFA Level 1
Portfolio Management

Understanding Benchmarks in Performance Evaluation

Very Easy Performance Evaluation Benchmarking

In portfolio management, benchmarking is essential for evaluating investment performance. A benchmark serves as a standard for comparison, allowing investors to assess whether their portfolio has outperformed or underperformed relative to the market or a specific segment of it. Understanding the difference between a general benchmark and a customized benchmark can help in making informed investment decisions.

Which of the following statements best describes a benchmark in the context of performance evaluation?

Hint

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