The Q-ratio is a method of estimating the fair value of the stock market.

It's defined as the total price of the market divided by the replacement cost of all its companies. The concept was originally developed by economist James Tobin also referred to as Tobin's Q.

More recently, it's been advocated by Andrew Smithers and Stephen Wright in their prescient book Valuing Wall Street Amazon reviews. We're using the Z1 Flow of Funds report from the Federal Reserve, as indicated.

Tobin's Q Ratio Definition from Financial Times Lexicon

As ofthe location of the relevant data has changed. For the total market price, buying grey market stocks now using B.

Q Ratio - Video | Investopedia

And for the replacement cost, we're using B. The associated codes are LM The underlying data we used is available here.

Note that what we're graphing is actually the value of Q relative to its historical average q ratio value the stock market ratios 0. Q ratio value the stock market ratios results closely match those of Andrew Smithers.

The "Q Ratio" Reveals That The Stock Market Is At Least 41% Overvalued - Business Insider

Smithers' graphs incorporate significantly more data, going back toand captures the extended period of undervaluation early in the previous century. As of this writing, therefore, Smithers' average Q value is 0.

How to value the stock market using the Equity Q ratio - ValueWalk

If we substitute Smithers' figure, the valuations match exactly. Additional Resources on Q: Please click here if you are not redirected within a few seconds.

This page is an attempt to independently recreate the Q graphs from the raw data. Be notified when this chart is updated: An email address is required.