<p>You might refer to an article written by Perfect and Wiles (1994). They present five different measures of Q-ratio.
The complete citation is: Steven B. Perfect, Kenneth W. Wiles, 1994. Alternative constructions of Tobin's q: An empirical comparison, Journal of Empirical Finance, Volume 1, Issues 3–4, Pages 313-341, <a href="https://doi.org/10.1016/0927-5398(94)90007-8" rel="nofollow noreferrer">https://doi.org/10.1016/0927-5398(94)90007-8</a>.</p>

CC BY-SA 4.0
2024-05-16T09:12:19.403Z
2024-05-16T09:12:19.403Z
user48021
<p>If you are interested in Tobin's (average) q,  you might find useful <em>A Simple Approximation of Tobin's q</em> (<a href="http://www.jstor.org/stable/3665623?seq=1#page_scan_tab_contents" rel="nofollow">Chung and Pruitt (1994)</a>). That paper has a highly accurate approximation for Tobin's Q using Compustat. While the JSTOR copy I linked to is pay-walled, other versions appear not to be. </p>

CC BY-SA 3.0
2015-10-12T17:47:18.113Z
2015-10-12T17:47:18.113Z
BKay
<p>How do people calculate Tobin'q empirically? </p>

<p>Does anyone use it to make investment decisions? In particular, the version I learnt has no company debt involved with only capital under consideration, will this affect empirical research? </p>

CC BY-SA 3.0
2015-10-08T15:12:45.417Z
Average or marginal Q?
BKay
CC BY-SA 3.0
2015-10-11T23:48:03.633Z
I don't know there's a Average and Marginal Q. I'm taking a course in Graduate MacroEcon, the Q we covered was equivalent to the Market to Book ratio of the market.
Kenneth Chen
CC BY-SA 3.0
2015-10-12T00:27:53.767Z
That's average Q. Q is the ratio of an asset's market value to the replacement cost of that asset. In some macro finance models a firm makes marginal investments until the market value of an additional investment exactly equals its replacement cost. This gives a marginal Q of 1. But along the way initial investments would be higher than one (diminishing marginal value of capital). So even if all firms had a marginal Q of 1 they might have very different average Q.
BKay
CC BY-SA 3.0
2015-10-12T00:50:43.813Z
That sounds reasonable. Is there any good empirical reference I can consult from?
Kenneth Chen
<reference-request><finance><empirical-evidence>
How to measure Tobin's q?
Kenneth Chen
# How to measure Tobin's q?

(Asked by: username_0 on 2015-10-08)

How do people calculate Tobin'q empirically?

Does anyone use it to make investment decisions? In particular, the version I learnt has no company debt involved with only capital under consideration, will this affect empirical research?

**Tags:** reference-request, finance, empirical-evidence
> **Comments:**
> **username_1**: Average or marginal Q?  
> **username_0**: I don't know there's a Average and Marginal Q. I'm taking a course in Graduate MacroEcon, the Q we covered was equivalent to the Market to Book ratio of the market.  
> **username_1**: That's average Q. Q is the ratio of an asset's market value to the replacement cost of that asset. In some macro finance models a firm makes marginal investments until the market value of an additional investment exactly equals its replacement cost. This gives a marginal Q of 1. But along the way initial investments would be higher than one (diminishing marginal value of capital). So even if all firms had a marginal Q of 1 they might have very different average Q.  
> **username_0**: That sounds reasonable. Is there any good empirical reference I can consult from?  

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## 2 answers

### Answer by username_1 on 2015-10-12. Score: 2 | Accepted answer

If you are interested in Tobin's (average) q, you might find useful *A Simple Approximation of Tobin's q* ([Chung and Pruitt (1994)](http://www.jstor.org/stable/3665623?seq=1#page_scan_tab_contents)). That paper has a highly accurate approximation for Tobin's Q using Compustat. While the JSTOR copy I linked to is pay-walled, other versions appear not to be.


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### Answer by username_2 on 2024-05-16. Score: 0

You might refer to an article written by Perfect and Wiles (1994). They present five different measures of Q-ratio.
The complete citation is: Steven B. Perfect, Kenneth W. Wiles, 1994. Alternative constructions of Tobin's q: An empirical comparison, Journal of Empirical Finance, Volume 1, Issues 3–4, Pages 313-341, <https://doi.org/10.1016/0927-5398(94)90007-8>.


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