THE STUDY OF RELATIONSHIP BETWEEN TOBIN’S Q AND US STOCK PERFORMANCE OF SELECTED FIRMS

International Journal of Advanced Economics

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Field Value
 
Title THE STUDY OF RELATIONSHIP BETWEEN TOBIN’S Q AND US STOCK PERFORMANCE OF SELECTED FIRMS
 
Creator Ghosh, Papiya
Guha, Brishti
 
Subject Tobin’Q
Stock Performance
Panel Cointegration
Panel ECM
GMM
DOLS
 
Description The objective of study was to test the dynamic effects of changes in Tobin’Q on stock prices of selected 249 US public companies of different industry categories. Panel unit roots tests and cointegration tests are implemented. Next, DOLS and GMM models are estimated. Annual data for the 2004-2012 period are used for the above selected US companies. Panel unit root tests provide somewhat mixed evidence of non-stationarity of both variables. There is clear evidence of cointegration between the above variables. The negative coefficient of the error-correction term shows convergence toward long-run equilibrium, though at slow pace. The estimates also reveal shortrun net positive interactive feedback effects between the variables. Both DOLS and GMM estimates display similar picture of overvaluation of stocks in terms of upward movement in Tobin’s Q beyond 0-to-1 range. For most parts of the sample period, the US stock market was in declining mode due to heightening of economic uncertainties during the Great Recession and several years beyond. Tobin’s Q should be improved to boost stock prices. This is more of a long-run phenomenon. In the short run, both reinforce each other. The topic is unique and the existing literature on this topic is scant. Relatively new econometric techniques have been applied for estimation using panel data. The results are quite insightful, in our view.
 
Publisher International Journal of Advanced Economics
 
Date 2020-06-22
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://fepbl.com/index.php/ijae/article/view/56
 
Source International Journal of Advanced Economics; Vol. 1 No. 2 (2019); 85-94
2707-2142
2707-2134
 
Language eng
 
Relation http://fepbl.com/index.php/ijae/article/view/56/263
 
Rights Copyright (c) 2019 Papiya Ghosh, Brishti Guha
https://creativecommons.org/licenses/by-nc/4.0
 

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