[Excerpt] Nearly three decades ago, Tobin (1969) formulated a theory of investment that relies on the ratio of marginal asset values to replacement costs- Tobin’s Q. The Q-ratio appears in the corporate finance literature as a measure of firms’ intangible values. Changes in Q as a result of restructurings and other corporate strategic moves indicate shareholder wealth maximizing behaviors. No such applications appear in the real estate literature, although important opportunities exist for applying Q-ratios to determine the intangible value of real estate. As an equilibrium concept the Q-ratio has tremendous potential for analyzing the strengths and weaknesses of markets for investment in existing assets and for analyzing development opportunities.
Corgel, J. B. (1997). Determinants of hotel property prices.Retrieved [insert date], from Cornell University, School of Hotel Administration site: http://scholarship.sha.cornell.edu/articles/663