Definition of Benchmark Stock Index
A benchmark stock index is one that is regarded as the leading exchange in a particular country, such as the FTSE100 in the UK, the Dow Jones Industrial Average 30 in the US, the Euro Stoxx 50 in the Eurozone, and the Nikkei 225 in Japan- the four major global traded exchanges -with the digits representing the number of individual stocks that comprise the exchange. Benchmark indices play an important role in assessing stock investment performance, with investment managers' returns being recorded as being above or below 'the benchmark'; in the case of the former, being outperformance and the latter being underperformance. Many 'real money' fund managers (i.e. longer-term conservative investment managers, such as pension funds) are only allowed to invest money into benchmark assets, or assets with the same (or close) standing as the benchmarks. Funds that specifically invest according to the performance of the benchmark are referred to as 'tracker funds' (i.e. tracking the benchmark).