Equities

Equity risk splits between systematic market moves and idiosyncratic, company-specific outcomes — the distinction that underpins index versus single-name exposure and beta-driven hedging. This hub covers how equity risk is measured and managed across both.

How the market works

Equities are shares of ownership in companies. They are created in the primary market (IPOs and secondary offerings) and then trade in the secondary market on exchanges, with clearing and settlement infrastructure behind it — the mechanism that connects investors (capital providers) with issuers (capital users). Risk decomposes into systematic (market-wide, the part captured by an index and measured through beta) and idiosyncratic (company-specific) components; diversification removes the latter, leaving market risk that is hedged with index futures and options. Implied volatility — the VIX for US large-caps — is the market’s price of that risk.

Major trade flows

Equity markets are large and concentrated: global equity market capitalisation was roughly US$127 trillion at end-2024, and US markets alone make up about 49% (~US$62 trillion), making them the deepest and most liquid in the world, followed by Europe, China, Japan and India. Capital flows run through primary issuance (companies raising equity) and vast secondary turnover across exchanges tracked by the World Federation of Exchanges. Cross-border equity investing links these pools, so global risk appetite, index rebalancing and passive fund flows move markets well beyond any single company’s fundamentals.