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.
According to Macroeconomics by Mankiw (7th edition),
- Equilibrium. A state of balance between opposing forces, such as the balance of supply and demand in a market.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
