Stability Of Excellence: Revealed Patterns In Tobins q-Ratios

Abstract

Much has been written about characteristics of excellent firms, but little attention has been given to the possibility that excellence, once attained, is the result of a random process. This study uses market valuation concepts to construct a single measure of the multiple dimensions of excellent asset management to test the stability of excellence for a large sample of firms over a 20-year period. The findings suggest that firms are unable to sustain excellence from year-to-year, but excellence is maintained over longer run holding periods. The results also help explain findings in other studies where excellent firms have subsequently provided low rates of return to investors.