Tobin’s q compares the current market value of a company (or equity market) to the replacement cost of its assets. If no equilibrium value is available the theoretical value of Tobin’s q is 1.0. If the current Tobin’s q is above (below) 1.0 the firm’s stock (or equity market) is presumed to be overpriced (underpriced). A long run average could be used for the equilibrium value which could be greater or less than 1. For example if the long run equilibrium value for an equity market is 1.5 and we observe a Tobin’s q for that market of 1.2 then even though Tobin’s q is greater than 1 the market would still be considered undervalued compared to the long run average equilibrium value. | 
