The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Tobin’s q

  • Gary Smith
Reference work entry


Tobin’s q is the ratio of the market value of a firm to the replacement cost of its assets, a statistic that depends on the firm’s profitability and financial markets’ required rate of return. Although there are a variety of measurement issues, including the distinction between marginal and average q, Tobin’s q can be used to predict investment spending or to control for a firm’s current and future profitability in empirical studies of corporate structure and behaviour.


Accounting conventions Adjustment costs Corporate finance Depreciation Heterogeneous capital Inflation Investment decisions Keynes, J. M Monopoly rents Rate of return Takeovers Technological progress Tobin, J Tobin’s q 

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Gary Smith
    • 1
  1. 1.