What's the point of a benchmark?
Markets tend to go up over time, so most things you could buy would make money. A benchmark is meant to represent the market as a whole (or a subset that is relevant to what you are trading), so you can tell if your specific choices helped or hurt your return. As an example, say you pick two financial stocks, Citi and Goldman.  They get you a return of 10% for the year, so you think you made good choices.  But if the financial sector as a whole had a return of 20%, your choices weren't actually that great. Yes an index is by definition any arbitrary selection. In general, to measure performance there are 2 ways: By absolute return - meaning you want a positive return at all times ie. 10% is good. -1% is bad. By relative return - this means beating the benchmark. For example, if the benchmark returns -20% and your portfolio returns -10%, then it has delivered +10% relative returns as compared to the benchmark. Some years your portfolio may perform better than the benchmark, and some years it may be the other way around.  Without a benchmark you will never know. And by the way if you choose poorly, you will never beat the benchmark. If the benchmark goes up 20% but your fund/investment only went up 3% you did make money, but you might want to reevaluate your strategy. One reason it matters whether or not you're beating the S&P 500 (or the Wilshire 5000, or whatever benchmark you choose to use) is to determine whether or not you'd be better off investing in an index fund (or some other investment vehicle) instead of pursuing whatever your current investment strategy happens to be.  Even if your investment strategy makes money, earning what the S&P 500 has averaged over multiple decades (around 10%) with an index fund means a lot more money than a 5% return with an actively managed portfolio (especially when you consider factors like compound interest and inflation). I use the S&P 500 as one of my criteria for judging how well (or poorly) my financial adviser is doing for me. If his recommendations (or trading activity on my behalf, if authorized) are inferior to the S&P 500, for too long, then I have a basis to discontinue the relationship. Check out this Wikipedia entry on stock market indices. There are legitimate criticisms, but on the whole I think they are useful. As an aside, the reason I point to index funds specifically is that they are the one of the lowest-cost, fire-and-forget investment strategies around.  If you compare the return of the S&P 500 index over multiple decades with most actively managed mutual funds, the S&P 500 index comes out ahead.
This didn't answer his question. Also, while I agree with you that the Dow is meaningless (and your explanation why). In the investment industry, we don't only focus on the S&amp;P Index.. Many have a specific benchmark they aim to outperform that matches their investment strategy (i.e. Russell Mid Cap Value, Russell 3000, etc.). Your observation is mostly right, that 1 is a the number around which this varies.  You are actually referencing PEG, P/E to Growth ratio, which is a common benchmark to use to evaluate a stock. The article I link to provides more discussion. I also think Benchmark knows the business model isn't sustainable at this point - their goal is to IPO as quickly as possible and get the fuck out before the whole thing tanks. They need Travis out to beat it into IPO-able shape. "no way -- he suggests that if you don't have an edge, no one needs to play the game. He doesn't like the idea of a ""lesser bad"" way to invest (MPT).   If you do decide to get involved in investing, then it's about absolute performance, not relative. He believes that the whole relative performance thing -- beating some arbitrary benchmark -- is just an artificial construct." Yes, it makes sense. Like Lagerbaer says, the usefulness of technical indicators can not be answered with a simple yes or no. Some people gain something from it, others do not. Aside from this, applying technical indicators (or any other form of technical analysis - like order flow) to instruments which are composed of other instruments, such as indexes (more accurately, a derivative of it), does make sense. There are many theories why this is the case, but personally i believe it is a mixture of self fulfilling prophecy, that the instruments the index is composed of (like the stocks in the S&P500) are traded in similar ways as the index (or rather a trade-able derivative of it like ETFs and futures), and the idea that TA just represents human emotion and interaction in trading. This is a very subjective topic, so take this with a grain of salt, but in contrast to JoeTaxpayer i believe that yields are not necessary in order to use TA successfully. As long as the given instrument is liquid enough, TA can be applied and used to gain an edge. On the other hand, to answer your second question, not all stocks in an index correlate all the time, and not all of them will move in sync with the index. So basically they are trying to see two things.  One is whether prices are correlated to each other for long periods of time as a preliminary study suggested (which would go against efficient markets hypothesis, since you could use that info to game the market) or if that result is illusory and the long term returns are close to a standard normal distribution which would follow the effiecient markets hypo.  The second thing I don't follow as well, but they're trying to solve the first thing so that they can then look at why, when they look at returns at different time scales, (1minute, one hour, one week), the model which had been proposed for these returns is not supported by the data  (the first thing). They say that the old model (Levy) says that the variability should not be the same at the different time scales, but the data suggests that it is.  So they then propose a modification of the old Levy model, and say that it would also explain the strange first result they looked at. (that prices are correlated for longer periods).  That probably doesn't make any sense, but you might have more luck by posting in /r/statistics. "It's not my industry so I may be wrong, but I don't believe there are any transactions or companies that would provide a worthwhile comparable, hence my problem with the valuation attempt. For the same reasons you wouldn't use a P/E multiple or DDM model on a startup, you don't just pick tangential comparables and slap a value on it. If you're seriously advising companies, that shit will land you in court defending your valuation.  It's not a ""floor"" just because you know it's inaccurate.. it's irrelevant. Quite frankly, I don't think they released any value, let alone $1bn.  It's merely a PR move, with the hope that Tesla's technology will become the standard for all EVs.  At best, major companies decide to use some of their patents ""in good faith"" and leverage the infrastructure that Tesla has already put in place.   At worst, Tesla still did not give away $1bn in value. How much have they made off of licensing their patents? How much have others offered for their patents? How many companies are infringing, and how many lawsuits have they won from going after them? If you can't put a hard figure on any of those, or a solid rationale on how the patents are the only reason they'll be able to gain market share, then I don't see how we can conclude on $1bn given away." Eh using a benchmark that's designed for Hedge Funds is a little different. I was guessing the other comment was referring to SPX or similar for the 10%. Most people don't understand HF as investment vehicles. They are meant to be market neutral and focused on absolute returns. Yes, you can benchmark them against each other / strategy but most people here seem to think that HFs want to beat the S&amp;P 500.