Q Ratio (Tobin's Q Ratio)

A ratio devised by James Tobin of Yale University, Nobel laureate in economics, who hypothesized that the combined market value of all the companies on the stock market should be about equal to their replacement costs. The Q ratio is calculated as the market value of a company divided by the replacement value of the firm's assets:

Q Ratio (Tobin's Q ratio)

For example, a low Q (between 0 and 1) means that the cost to replace a firm's assets is greater than the value of its stock. This implies that the stock is undervalued. Conversely, a high Q (greater than 1) implies that a firm's stock is more expensive than the replacement cost of its assets, which implies that the stock is overvalued. This measure of stock valuation is the driving factor behind investment decisions in Tobin's model.


Investment dictionary. . 2012.

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  • Tobin's q — Tobin s qref|spelling is a ratio comparing the value of a company given by financial markets with the value of a company s assets. The ratio was developed by James Tobin (Tobin 1969). It is calculated by dividing the market value of a company by… …   Wikipedia

  • Tobin, James — ▪ 2003       American economist (b. March 5, 1918, Champaign, Ill. d. March 11, 2002, New Haven, Conn.), was awarded the Nobel Prize for Economics in 1981 for his portfolio selection theory a theoretical formulation of investment behaviour that… …   Universalium

  • Tobin's Q — Market value of assets divided by replacement value of assets. A Tobin s Q ratio greater than 1 indicates the firm has done well with its investment decisions. The New York Times Financial Glossary market value of assets divided by replacement… …   Financial and business terms

  • Tobin's Q ratio — also: Q ratio market value of a firm s assets divided by replacement value of the firm s assets. Named after James Tobin of Yale University. Bloomberg Financial Dictionary …   Financial and business terms

  • Tobin's Q — See: Q ratio …   Accounting dictionary

  • Tobin's Q — See Q ratio …   Big dictionary of business and management

  • Q ratio — Tobin s Q A ratio devised by the US economic analyst James Tobin to measure the impact of intangible assets on business value. It is the ratio of the market value of a business to the replacement cost of its assets …   Accounting dictionary

  • Q ratio — Tobin s Q A ratio devised by the US economic analyst James Tobin to measure the impact of intangible assets on business value. It is the ratio of the market value of a business to the replacement cost of its assets …   Big dictionary of business and management

  • James Tobin — Infobox Scientist name = James Tobin birth date = birth date|1918|3|5 birth place = Champaign, Illinois, USA death date = death date and age|2002|3|11|1918|3|5 death place = New Haven, Connecticut, USA residence = nationality = United States… …   Wikipedia

  • Inverse Mills ratio — In statistics, the inverse Mills ratio, named after John P. Mills, is the ratio of the probability density function to the cumulative distribution function of a distribution. Use of the inverse Mills ratio is often motivated by the following… …   Wikipedia

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