Which characteristic of a benchmark indicates that it should be set prior to the investment period?

A benchmark should be specified in advance to ensure clarity and consistency in measuring investment performance. By establishing the parameters of the benchmark before the investment period begins, investors can have a reliable reference point for evaluating the performance of their investment strategies. This characteristic diminishes the potential for bias and enhances accountability, as the benchmark serves as a predetermined measure that does not change in response to investment results.

Setting a benchmark prior to the investment period establishes clear expectations for both the investor and the manager and creates a framework that allows for meaningful comparisons against the performance of the assets in question. This approach supports a structured and disciplined investment process, which is critical for effective performance evaluation.