This lesson examines equity markets, where ownership shares in corporations are traded, providing companies with permanent capital and enabling investors to participate in corporate growth .

4.1 Equity Securities and Markets
Equity securities represent ownership in a corporation . Key characteristics include: Common stock (voting rights, residual claim on profits), Preferred stock (priority claim on dividends), and American/Global Depositary Receipts (ADRs/GDRs) for international trading . Market participants include institutional investors (pension funds, mutual funds, hedge funds), retail investors, and investment banks .

4.2 Equity Valuation
The Dividend Discount Model values a stock based on the present value of expected future dividends . Key valuation models include: Gordon Growth Model (constant growth), Multi-stage growth models, and Price multiples (P/E, P/B, P/S) . Market efficiency theory suggests that stock prices reflect all available information, though the degree of efficiency is debated .

4.3 Stock Indices and Trading Mechanisms
Stock indices (e.g., S&P 500, FTSE 100, DAX) track market performance . Trading occurs on exchanges with standardised rules and procedures, with mechanisms including order books, limit orders, market orders, and trading halts/circuit breakers . Current trends include algorithmic trading, dark pools, and high-frequency trading .