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Marginal q revisited

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  • Per-Olof Bjuggren

Abstract

Two measures of firm investment behaviour used in the empirical research are Tobin´s q (average q) and marginal q. The marginal q is a more recently introduced measure than Tobin´s q and is not as well known. This article aims to demonstrate the advantages of using marginal q as a performance measure and is a response to an earlier critical article (Berglund, 2011) claiming an elusiveness bias. The pro arguments made in response are that the claimed elusiveness is not a problem. Furthermore, many of the evaluation problems inherent in the empirical use of Tobin´s q, like estimation of replacement cost of assets, can be avoided. From a pure theoretical standpoint, it has long been recognized that marginal q is superior to an average measure of investment behaviour such as Tobin´s q.

Suggested Citation

  • Per-Olof Bjuggren, 2016. "Marginal q revisited," Applied Economics, Taylor & Francis Journals, vol. 48(1), pages 52-58, January.
    • Handle: RePEc:taf:applec:v:48:y:2016:i:1:p:52-58
    DOI: 10.1080/00036846.2015.1073842
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