Tobin's Q - Other Influences On Q

Other Influences On Q

Tobin's q measures two variables - the current price of capital assets as measured by accountants or statisticians and the market value of equity and bonds - but there are other elements that may affect the value of q, namely:

• Market hype and speculation, reflecting, for example, analysts' views of the prospects for companies, or speculation such as bid rumors.
• The "intellectual capital" of corporations, that is, the unmeasured contribution of knowledge, goodwill, technology and other intangible assets that a company may have but aren't recorded by accountants. Some companies seek to develop ways to measure intangible assets such as intellectual capital. See balanced scorecard.

Tobin's q is said to be influenced by market hype and intangible assets so that we see swings in q around the value of 1.