Financial equilibrium
Financial equilibrium (or, simply, equilibrium) is the condition under which the intrinsic value of a security is equal to its price; also, when a security's expected return is equal to its required return.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Equilibrium. The condition under which the intrinsic value of a security is equal to its price; also, when a security's expected return is equal to its required return.
According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),
- Equilibrium. The situation in which the actual market price equals the intrinsic value, so investors are indifferent between buying and selling a stock.
According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),
- Equilibrium. The condition under which the expected return on a security is just equal to its required return, r⁄i 5 ri. Also, P0 5 P⁄0, and the price is stable.
According to Principles of Economics by Timothy Taylor (3rd edition),
- Equilibrium. The combination of price and quantity where there is no economic pressure from surpluses or shortages that would cause price or quantity to shift.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
