Research Details

Abstract

In recent years, US 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.

Type

Article

Author(s)

Nicolas Crouzet, Janice C. Eberly

Date Published

2023

Citations

Crouzet, Nicolas, and Janice C. Eberly. 2023. Rents and Intangible Capital: a "Q+" approach. Journal of Finance.(4): 1873-1916.