Tobin’s Q as a market-based measure of firm’s performance and as a proxy for exposure to systematic risk.
Since its introduction in 1969, the q ratio has been used to explain a wide variety of phenomena. It has increasingly been used as a financial-market measure of firm’s performance, and also a measure of a firm’s intangible value. In this paper, we use Tobin’s q as a financial market-based measure of...
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sg-ntu-dr.10356-150062019-12-10T11:19:05Z Tobin’s Q as a market-based measure of firm’s performance and as a proxy for exposure to systematic risk. Ng, Hao Chieh. Kuik, Zoe Soo Hsien. Chan, Hwa Jiat. Zhou Jie School of Humanities and Social Sciences DRNTU::Social sciences::Economic theory::Macroeconomics Since its introduction in 1969, the q ratio has been used to explain a wide variety of phenomena. It has increasingly been used as a financial-market measure of firm’s performance, and also a measure of a firm’s intangible value. In this paper, we use Tobin’s q as a financial market-based measure of firm performance and examine the association between firm performance and stock market valuation of equities, plus 2 factors: book-to-market equity and size, which according to Fama and French [1992], explain the variation of cross section expected returns. We also controlled for firm-specific and macroeconomic variables. The results based on data from 1995-2007, of 25 listed corporations in the Singapore market, indicate that the inclusion of the 3 factors and industrial dummies increased the variance explained in q significantly. Stock price performance and size have significantly positive association with q ratio; book-to-market equity has an inverse association. The results also show that firms in industries with average q more than 1 have a premium in performance and valuation relative to those firms in industries with average q equal or less than 1. We also substituted Tobin’s q for book-to-market equity as one of the factors that proxy for exposure to systematic risk to examine if this ratio has a relatively stronger association with an asset’s returns. The other factors included are market return and size, and we controlled for macroeconomic-wide variables. The results indicate a negative association between asset returns and book-to-market equity; and a positive one between asset returns and q ratio. The results show that after controlling for macroeconomic variables and size, market return and q ratio are the only 2 significant factors in predicting security returns; and that q ratio is a more superior factor in explaining security returns. In fact, the results also indicate those firms with high q commands a premium in security returns relative to firms with low q ratio. Bachelor of Arts 2009-03-19T03:37:46Z 2009-03-19T03:37:46Z 2009 2009 Final Year Project (FYP) http://hdl.handle.net/10356/15006 en 42 p. application/pdf |
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DRNTU::Social sciences::Economic theory::Macroeconomics Ng, Hao Chieh. Kuik, Zoe Soo Hsien. Chan, Hwa Jiat. Tobin’s Q as a market-based measure of firm’s performance and as a proxy for exposure to systematic risk. |
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Since its introduction in 1969, the q ratio has been used to explain a wide variety of phenomena. It has increasingly been used as a financial-market measure of firm’s performance, and also a measure of a firm’s intangible value. In this paper, we use Tobin’s q as a financial market-based measure of firm performance and examine the association between firm performance and stock market valuation of equities, plus 2 factors: book-to-market equity and size, which according to Fama and French [1992], explain the variation of cross section expected returns. We also controlled for firm-specific and macroeconomic variables. The results based on data from 1995-2007, of 25 listed corporations in the Singapore market, indicate that the inclusion of the 3 factors and industrial dummies increased the variance explained in q significantly. Stock price performance and size have significantly positive association with q ratio; book-to-market equity has an inverse association. The results also show that firms in industries with average q more than 1 have a premium in performance and valuation relative to those firms in industries with average q equal or less than 1.
We also substituted Tobin’s q for book-to-market equity as one of the factors that proxy for exposure to systematic risk to examine if this ratio has a relatively stronger association with an asset’s returns. The other factors included are market return and size, and we controlled for macroeconomic-wide variables. The results indicate a negative association between asset returns and book-to-market equity; and a positive one between asset returns and q ratio. The results show that after controlling for macroeconomic variables and size, market return and q ratio are the only 2 significant factors in predicting security returns; and that q ratio is a more superior factor in explaining security returns. In fact, the results also indicate those firms with high q commands a premium in security returns relative to firms with low q ratio. |
author2 |
Zhou Jie |
author_facet |
Zhou Jie Ng, Hao Chieh. Kuik, Zoe Soo Hsien. Chan, Hwa Jiat. |
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Final Year Project |
author |
Ng, Hao Chieh. Kuik, Zoe Soo Hsien. Chan, Hwa Jiat. |
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Ng, Hao Chieh. |
title |
Tobin’s Q as a market-based measure of firm’s performance and as a proxy for exposure to systematic risk. |
title_short |
Tobin’s Q as a market-based measure of firm’s performance and as a proxy for exposure to systematic risk. |
title_full |
Tobin’s Q as a market-based measure of firm’s performance and as a proxy for exposure to systematic risk. |
title_fullStr |
Tobin’s Q as a market-based measure of firm’s performance and as a proxy for exposure to systematic risk. |
title_full_unstemmed |
Tobin’s Q as a market-based measure of firm’s performance and as a proxy for exposure to systematic risk. |
title_sort |
tobin’s q as a market-based measure of firm’s performance and as a proxy for exposure to systematic risk. |
publishDate |
2009 |
url |
http://hdl.handle.net/10356/15006 |
_version_ |
1681049113254166528 |