Abstract

http://ssrn.com/abstract=2293527
 
 

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Tobin's Q and Stock Market Performance


Vichet Sum


University of Maryland Eastern Shore - School of Business and Technology

July 14, 2013


Abstract:     
This study examines if the change in aggregate Tobin’s q ratio (∆TBQ) can dynamically forecast return on the S&P 500 (SP). The VAR results from analyzing quarterly data from 1951Q4 to 2012Q4 show that the response of SP to ∆TBQ shock becomes significantly positive immediately. The Granger-causality test results reveal that ∆TBQ Granger-causes SP; the reverse causality is not evident. The variance decomposition results reveal that ∆TBQ forecasts about 70% of SP at the two-quarter to eight-quarter horizons.

Number of Pages in PDF File: 11

Keywords: Tobin’s q ratio, stock market performance, VAR

JEL Classification: G12, G14, G17

working papers series





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Date posted: July 14, 2013 ; Last revised: September 1, 2014

Suggested Citation

Sum, Vichet, Tobin's Q and Stock Market Performance (July 14, 2013). Available at SSRN: http://ssrn.com/abstract=2293527 or http://dx.doi.org/10.2139/ssrn.2293527

Contact Information

Vichet Sum (Contact Author)
University of Maryland Eastern Shore - School of Business and Technology ( email )
2105 Kiah Hall
Princess Anne, MD 21853
United States
410-651-6531 (Phone)
410-651-6529 (Fax)
HOME PAGE: http://www.umes.edu/bma/Sum.html
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