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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.
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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False, unless they invested with margin.
Convertible. A convertible bond is technical a debt security.
Still unclear on Equity Security? Try out the financial modeling course Quant 101.
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