Signal MGI rebuts the argument that the high US Tobin's Q reflects mismeasured intellectual property

Summary

MGI addresses a common objection to its finding that US equity is valued at 2.4 times corporate net assets, a ratio known as Tobin's Q. Some argue that the high US ratio is an artefact of intellectual property being mismeasured, in an equity market led above all by major technology companies. The report tests this claim and finds that, for it to hold, one would roughly have to assume that investments in intellectual property never depreciate or become obsolete. That assumption contrasts with the usual practice of statistical agencies, which assign such assets three to seven years of useful value. MGI therefore maintains that the high US ratio cannot be explained away by measurement problems alone, while acknowledging that questions about valuing assets remain.