Tobin's Q

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The following is a scatterplot of Tobin Q using historical data downloaded from St. Louis Fed.

The Tobin's Q ratio is a ratio devised by James Tobin of Yale University, Nobel laureate in economics. The Q ratio suggests that the combined market value of all the companies on the stock market should be about equal to their total equity value. If the market value reflected solely the recorded assets of companies, then Tobin's q would be 1.0. If Tobin's q is greater than 1.0, then the market value is greater than the value of the companies' recorded assets.

Current Tobin Q = 1.24 is 69% from long-term average.

Record: max= 1.69 ; min= 0.28 ; mean= 0.73 ; median= 0.74

Market is overvalued.

The plot is produced by R, and will be updated on a quarterly basis.

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