I change “equity market” to “stock market” tens of times every three months when I edit asset managers’ quarterly investment performance reports. Am I doing the right thing? The answer isn’t as clear as I, accustomed to clients who invest solely in stocks, initially thought.
Equities vs. stocks
Some of my wise colleagues on LinkedIn gently reminded me that equities include both publicly traded investments – meaning “stocks” – and privately traded investments, such as private equity or venture capital. So, there are times when “equity market” is more accurate than “stock market.” If market strategists’ comments cut across these investments, they might prefer the term “equity market.”
Plain English is easier to understand
While “equity market” is technically correct, I prefer to use plain English. I figure most of the time “stock market” is inclusive enough. For example, a friend pointed out that many stock mutual funds may use derivatives, which are not “stocks” in the narrowest sense of the word. However, I figure the portfolio manager’s market commentary isn’t going to dig down to the level of derivatives, so it’s fine to refer to it as “stock market” commentary.
Even if a writer digs beyond stocks, I’d prefer not to use the term “equity.” After all, many Americans’ only association with the term is “home equity.”
SEC chairman’s high standard for financial disclosures
I’m railing against “equity” because, as I said in “The Levitt Test for financial risk disclosures,” I agree with the following statement by former SEC chairman Arthur Levitt:
For the language of financial disclosure, we need to raise the standard from “potentially understandable” to “impossible to be misunderstood.”
I wish I could offer you a sleek, plain English alternative to “equity market” that incorporates more than just stocks. My first thought is to list the forms of investment under discussion, such as “stocks, hedge funds, and private equity.”
If you have a better idea, I’d like to hear from you.
Please vote in my poll
Please vote in the poll that appears in the right hand column of this blog.
Question: When is it okay to write “equity market” instead of plain English?
- Only when the corporate style guide requires “equity market”
- Only when your discussion includes more than stocks
- Whenever you please
- (Add your own answer)
What’s the scoop outside the U.S.?
I’m mainly familiar with U.S. practices. A European LinkedIn colleague told me that in the United Kingdom they use “shares” instead of “stocks.” I welcome any comments on practices outside my home country.