A reader asked: “I was wondering if you can weigh in on Tobin’s q as a predictor of stock returns.”
The only place Tobin’s q shows up on CXOadvisory.com at present is in “A Better Way to Define Value?”. This item summarizes a study finding that the Enterprise Multiple [(equity value + debt value + preferred stock – cash)/ EBITDA] outperforms Tobin’s q in predicting stock returns.
A search of SSRN for “Tobin’s q” + “expected returns” (and similar key word combinations) generates no recent studies of Tobin’s q that appear to inform investing explicitly.
