Definition of Equity Risk
What is Equity Risk
Equity risk is the risk or probability for loss in holding equity or shares of stock in a specific investment. The market price of shares will change frequently depending on supply and demand so there is a risk of loss if there is a drop in the share price.
Equity risk premium is the rate of return required by an investor to take on a higher risk equity investment. It is defined as the excess rate of return that is earned when a person invests in an equity security as compared to a risk-free rate.
Glossary of Terms and Phrases
A financial dictionary or glossary is an essential tool to better understand the meaning of a specialized term or phrase. It would obviously make life much easier if everyone spoke the same language and used the same financial terms and phrases but that is not realistic.
We learn new languages to communicate with each other, transact business globally and to appreciate other cultures. Global finance is a specialized language that if understood and mastered, it will provide benefits that help to decrease risk and improve investment returns. Financial literacy is the foundation of developing good investment strategies and sound decision making.