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Tobin’s q-Investment Theory

In the 60s and 70s, economists including Nicholas Kaldor and James Tobin came up with an alternative investment theory: the q-investment theory, sometimes also referred to as Tobin’s q-investment theory. At its core, Tobin’s q theory of investment relates fluctuations in investment to changes in the stock market. Although the theory gained popularity only in the 70s, first elements of the theory can already be found in works of John Maynard Keynes. In his General theory of employment, interest and money, Keynes mentioned already that investment might be linked to the stock market.

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