Rents and Intangible Capital: A Q+ Framework

ABSTRACT In recent years, U.S. investment has been lackluster, despite rising valuations. Key explanations include growing rents and growing intangibles. We propose and estimate a framework to quantify their roles. The gap between valuations—reflected in average Q—and investment—reflected in margina...

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Bibliographic Details
Published in:The Journal of finance (New York) 2023-08, Vol.78 (4), p.1873-1916
Main Authors: CROUZET, NICOLAS, EBERLY, JANICE
Format: Article
Language:English
Subjects:
Frame analysis
Intangible assets
Rents
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Summary:ABSTRACT In recent years, U.S. investment has been lackluster, despite rising valuations. Key explanations include growing rents and growing intangibles. We propose and estimate a framework to quantify their roles. The gap between valuations—reflected in average Q—and investment—reflected in marginal q—can be decomposed into three terms: the value of installed intangibles; rents generated by physical capital; and an interaction term, measuring rents generated by intangibles. The intangible related terms contribute significantly to the gap, particularly in fast‐growing sectors. Our findings suggest care in a pure‐rents interpretation, given the rising role of intangibles.
ISSN:0022-1082
1540-6261
DOI:10.1111/jofi.13231