What are Equities

In simple words

The term ‘equities’ can be used to delineate a variety of financial tools, but at their most basic they describe shares offered to buy or sell by publicly traded firms on the financial markets. Every company which is listed on a public financial exchange will have stocks available to be traded by investors.

How Can Stocks be Affected?


All shares are priced at a certain level, based on how the firm is valued by the markets. Stock prices are subject to constant change - upwards and downwards - which can be caused by the following factors.


1.Company Earnings


1.Company Earnings

Publicly traded companies announce their earnings each quarter, allowing traders to gain insights as to how the company is performing and whether the firm’s current business plan is proving to be successful. Financial analysts often closely monitor large companies and will make predictions regarding the firm’s possible earnings results, which can have a big impact on stock prices. Interestingly, this can lead to a scenario whereby the company makes a significant profit but its stock price still falls because the results have not met the predictions made by these financial analysts. The reverse can also be true, with a firm’s stock rising if losses are not as bad as expected.


2.Analyst Ratings


2.Analyst Ratings

Financial analysts also provide regular prognoses for many major stocks, issuing them with specific ratings - Buy, Sell, Underperform, Outperform and Hold. Buy and Sell are fairly self-explanatory, clearly stating the recommended action to take. Hold suggests a view that the stock will move in line with the general market. Underperform implies that the analyst in question believes that the stock will fare slightly worse than Hold, while Outperform indicates the expectation that it will do slightly better.

As useful as analyst ratings can ​be, traders shouldn't assume that they ​are always right; tellingly, analyst unanimity is ​rare. Ideally, study of analyst ratings should be used in conjuncture with your own research​​.


3. General Industry News

With many publicly traded firms centred on a specific sector - such as energy, retail or technology - sometimes news about such financial sectors can have a wide impact on all companies within that industry. So for example, if news breaks that the demand for gold is less than the total supplied by the industry as a whole, mining firms which focus on gold are likely to be affected.

It’s also possible for news about one particular company to have an impact on similar firms within the same industry. Tesco’s difficulties in 2014 saw its stock price plummet, which caused a slump for the stock prices of other supermarket companies. Tesco’s poor performance acted as an indicator to investors that the sector as a whole would be facing problems.

Takeover speculation is another common factor that can influence the share value of a firm, as are changes in executive management and radical changes in strategy.

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