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2 edition of Tobin"s q, economic rents, and the optimal stock of capital found in the catalog.

Tobin"s q, economic rents, and the optimal stock of capital

Richard W. Kopcke

Tobin"s q, economic rents, and the optimal stock of capital

by Richard W. Kopcke

  • 42 Want to read
  • 35 Currently reading

Published by Federal Reserve Bank of Boston in Boston, Mass .
Written in English

    Subjects:
  • Capital investments -- United States.

  • Edition Notes

    Statementby Richard W. Kopcke.
    SeriesWorking paper series -- no. 95-4., Working paper (Federal Reserve Bank of Boston) -- no. 95-4.
    The Physical Object
    Pagination26 p. :
    Number of Pages26
    ID Numbers
    Open LibraryOL15579095M

    rents. An empirical test, with Tobin's q as the measure of rents, is consistent with this theory. 1. Introduction It is beyond dispute that multimarket firms play a dominant role in modem society. Despite this, economic analysis does not have a great deal to say about firm diversification, and the theory that does exist is largely untested.'File Size: KB. the desired capital stock • For a firm that can rent capital at a price of rK, the firms’ profits at a point in time are π(k,X1,X2,,Xn)-rkk, where k is the amount of capital the firm rents and X1 to Xn are exogenous variables. • For a perfectly competitive firm, these would include the output.

    The firm can sometimes find it optimal to divest and sell its capital, I Cited by: 5. Tobin's Q, corporate diversification and firm performance (NBER working paper series) [Lang, Larry H. P] on *FREE* shipping on qualifying offers. Tobin's Q, corporate diversification and firm performance (NBER working paper series)Author: Larry H. P Lang.

      It is the total amount of physical capital at any particular moment in time. Capital is one of the factors of production. The other major factor is labor. Technology is sometimes referred to as the third factor of production. A stock is an amount. The market to book value ratio and the Tobins Q ratio are both indicators of a. The market to book value ratio and the tobins q ratio School Princeton University; Course Title FIN ; Type. Homework Help. Uploaded By asd Pages 6 .


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Tobin"s q, economic rents, and the optimal stock of capital by Richard W. Kopcke Download PDF EPUB FB2

Tobin's q, economic rents, and the optimal stock of capital. Boston, Mass.: Federal Reserve Bank of Boston, [] (OCoLC) Material Type: Internet resource: Document Type: Book, Internet Resource: All Authors / Contributors: Richard W Kopcke.

Downloadable. Within optimal investment programs, the accumulation of capital is a stable function of marginal q. Much of the interest in q, however, derives from its potential economic rents reflect the demand for capital when the optimal program changes.

If the marginal return on capital diminishes as capital increases, the correspondence between marginal q and the optimal. Tobin's q, economic rents, and the optimal stock of Tobins q. [Boston]: Federal Reserve Bank of Boston, [] (OCoLC) Material Type: Internet resource: Document Type: Book, Internet Resource: All Authors / Contributors: Richard W Kopcke.

Richard W. Kopcke, "Tobin's Q, economic rents, and the optimal stock of capital," Working PapersFederal Reserve Bank of Boston, revised Handle: RePEc:fip:fedbwp   When enterprises earn economic rents on inframarginal investments, the q theory of investment does not claim that changes in the optimal stock of capital must correspond consistently to changes in marginal q.

see more. share. share. share. Tobin's q, Economic Rents, and the Optimal Stock of Capital. If the marginal return on capital diminishes as capital increases, the correspondence between marginal q and the optimal stock of capital can shift whenever investors alter their assessments of prospective economic rents.

At such times, marginal q even could rise as the optimal stock of capital falls. Q Ratio (Tobin's Q Ratio): The Tobin's Q ratio is a ratio devised by James Tobin of Yale University, Nobel laureate in economics, who hypothesized that the combined market value of.

We can generalize to N types of capital, with only the first observed. This suggests a regression model of the following form: It should be noted that the equilibrium value of q for any firm will change from year to year as tax laws are changed and as there are changes in the mix of old capital (subject to old depreciation schedules), new capital (subject to new depreciation sched.

According to Tobin’s q-investment theory, firms base their investment decisions on q, where q represents the ratio between the market value of all physical capital and its replacement costs.

In the case that q is above one (q>1), the stock market values the firm more than the market value of its real assets.

Tobin's q (also known as q ratio and Kaldor's v) is the ratio between a physical asset's market value and its replacement was first introduced by Nicholas Kaldor in in his article "Marginal Productivity and the Macro-Economic Theories of Distribution: Comment on Samuelson and Modigliani". It was popularised a decade later, however, by James Tobin, who describes.

[Show full abstract] replicate the observed time paths of US consumption, investment, hours worked, the stock of physical capital, capital's share of.

Tobins Q Theory Tobin’s Q theory was developed in by James Tobin. Tobin’s Q is a ratio which compares the value of the stocks of a listed entity in the capital market with the value of its equity book value. Usually Tobin’s Q was applied as a method for predicting investment behavior.

The following relation exists among gross investment relative to the capital stock (I/K), the q ratio, the average price of capital goods (j) and the ratio of replacement investment to the capital stock (d): I/K = j[q – l] + d (8) Thus the I/K ratio is equal to d when Tobin’s q is unity.

If d = and j =then I/K would be and. Excellent question. Tobin's q ratio is defined as market value of the company/replacement value of the company's assets. Price/Book ratio is the market value of the company/book value.

So we see that the numerator in both ratios (the market. Tobin's q Ratio and Industrial Organization. Author(s): Eric B. Lindenberg and Stephen A. Ross rents, and these may not be the imputed current value of the existing capital stock and of.

Tobin's 'q' theory: Economics theory of investment behavior where 'q' represents the ratio of the market value of a firm's existing shares (share capital) to the replacement cost of the firm's physical assets (thus, replacement cost of the share capital).

It states that if q (representing equilibrium) is greater than one (q > 1), additional. We decompose the market-to-book ratio into two additive components: a conservatism correction factor and a future-to-book ratio. The conservatism correction factor exceeds the benchmark value of one whenever the accounting for past transactions has been subject to an (unconditional) conservatism bias.

the theory. If a firm can freely change its capital stock, then it will continue to increase or decrease its capital stock until q is equal to unity. Also, the role of the production function is never clear in Tobin's [15] exposition.

One may wonder if the "q" theory. I'm reading this great intermediate level macroeconomic book by Carlin and Soskice, and on p when discussing the empirical studies testing the Tobin's q theory to explain the behaviour of investment (excess sensitivity of investment over GDP), the following sentence appears «A testable prediction of the q theory is that current cash flow should have no impact on investment.

Investment, Tobin's q, and Interest Rates Xioaji Lin, Chong Wang, Neng Wang, Jinqiang Yang. NBER Working Paper No. Issued in AugustRevised in November NBER Program(s):Asset Pricing, Economic Fluctuations and Growth We study the impact of stochastic interest rates and capital illiquidity on investment and firm value by incorporating a widely used.

Tobin’s q theory 1. 1 Tobin’s q Theory 2. 2 Definition It is a ratio devised by James Tobin of Yale University, Nobel laureate in economics. It is the ratio between market value and replacement value of the same physical asset. 3.3 Optimal Investment with Convex Adjustment Costs The State of the World: The rm is a price taker in competitive markets.

Labor is exible (can be adjusted without cost). The only barrier to full and fast deployment of the pro t maximizing stock of capital are the convex costs of File Size: KB.in the present framework the value of capital stock evaluated in the financial market prK/p, relative to its replacement costpK, is r/p.

This is Tobin's q. If r/p0 and f(O)= 1, it can be seen from Figure 1 that the optimal growth rate of capital stock a*, and thereby the optimal.