Wednesday’s Word: Equity

By Robert Noens, Fall 2017 Student Intern

Equity. You hear the word all the time. In fact, other student interns have even used the word equity in previous blog posts such as a Wednesday Word for Equity Risk Premium, but what does equity mean?

Simply enough, equity means ownership or one’s amount of ownership in any particular thing (i.e. a stock or a home). For example, when someone buys stock, for a definition of stock please click “here,” they own a piece or a part of a company (i.e. owning one share of Apple, which may have millions or tens of millions of shares overall, is the equivalent of owning 1/10,000,000 of Apple). The same idea applies to calculating one’s home equity: one’s home equity is the current amount they have paid off their mortgage subtracted from the current market value of their home. In other words, home equity is the amount of one’s home that they own outright. An equity market is a market where one may buy or sell their ownership in something – generally what comes to mind is a stock market (i.e. buying or selling a percentage of ownership in Apple, which may prove to either increase or decrease in price overtime just as one’s home does). Ultimately, all equity boils down to is ownership.