DEFINITION of 'Absolute Return Index'
A stock index designed to measure absolute returns. The absolute return index is actually a composite index made up of five other indexes. This index is used to compare the absolute returns posted by the hedge fund market as a whole against individual hedge funds.
BREAKING DOWN 'Absolute Return Index'
The hedge fund absolute return index (HFRX) measures the comprehensive overall returns of hedge funds. Since hedge funds explore unique investment strategies and seek to obtain absolute returns rather than focus on beating the benchmark, the HFRX is representative of all hedge fund strategies.