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Equity Security Definition and Quiz

There are several types of equity securities, but common stock is by far the most prevalent and well known.
  1. Define - Define equity securities.
  2. Context - Use equity security in a sentence.
  3. Quiz - Test yourself.
face pic by Paul Alan Davis, CFA
Updated: February 17, 2021
Equity securities normally come with higher risk than debt securities. See what else they come with below.

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Equity Security for investment modeling


An Equity Security is an investment in the equity or ownership side of a business. It is typically a variable investment, meaning an investor may face a loss of principal. In the event of bankruptcy, Equity Securities are given lower priority than Debt Securities.

Synonym: stock, equities

For context, the investor in an Equity Security is normally interested more in the growth of capital than in a stream of income, like dividends.

Equity Security prices are sensitive to the business cycle and the forward-looking prospects of the firm.

In a Sentence

Doc:  Think of an equity security like the ownership of a home.
Lia:  So brokerage firms offering stocks on margin are like mortgage lenders?


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Video Script

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Click box for answer.

Long investors in an equity security can lose more than 100% on their investment. | True or False?

False, unless they invested with margin.

Which is not an example of an equity security? | Class A, Common, Convertible or Preferred?

Convertible. A convertible bond is technical a debt security.

Questions or Comments?

Still unclear on Equity Security? Try out the financial modeling course Quant 101.

Related Terms

Our trained humans found other terms in the category investment vehicles you may find helpful.

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