Tobin’s Q and Net ROI: Value Creation and the Concentration of Returns
Tuesday, May 26, 2026
Markets may appear expensive by historical standards, but aggregate valuations tell only part of the story.
In this paper, we revisit the relationship between Tobin’s Q and Net ROI through 2025 and examine how value creation within the S&P 500 has become increasingly concentrated in the Magnificent Seven. The data suggest that elevated market valuations continue to coincide with elevated realized returns on capital, but those returns are far from evenly distributed across the market.
The result is a more nuanced picture of today’s equity environment: not a uniformly expensive market, but a two-speed market defined by significant divergence in capital efficiency and economic performance.
Read the full paper here.