Equity

Terminology §

• Equity. Equity is a partial ownership of an asset (mostly companies)
  • Equity in a mortgage

$$\text{Equity}=\text{Net Market Value}-\text{Unpaid Balance}$$

- Equity in a company.
	- **Equity index**
		- $\coloneqq$ a weighted average of equities
		- e.g. _S&P 500, Dow Jones Ind. Avg., Nasdaq, Rusells 2000_ ← different indicies with different weights
		- ownership rights (like voting in decisions) are relinquished
	- [[Private Equity Firms]]
	- Earnings Season
		- Firms post earnings every quarter. Earnings $\equiv$ Income $\equiv$ Profit.
- You buy an equity because you expect
	1. It pays regular dividends
	2. You expect its price to go up ← S&P has always beaten any other asset class

• Dividend Discount Model. Pricing an equity.
• Minority Interest (=non-controlling interest):= The interests of a non-controlling stockholder.
  • This interest is not interest rate. It’s about having a stake.
• Fully Dilluted Shares:= total sum of outstanding shares.
• Common Stock: may not pay dividend; but if it does, you expect it to grow
• Preferred Stock: No voting rights, but during bankruptcy you can liquidate first.
• Comparable Company (Comps) Analysis. Which equity to buy?
• Dividend Yield

$$\text{Dividend Yield}=\frac{\text{Dividend per share}}{\text{Share price}}$$