In this paper, we show that Tobin's q and firm diversification are negatively related throughout the 1980s. This negative relation holds for different diversification measures and when we control for other known determinants of q. Further, diversified firms have lower q's than comparable portfolios of pure-play firms. Firms that choose to diversify are poor performers relative to firms that do not, but there is only weak evidence that they have lower q's than the average firm in their industry. We find no evidence supportive of the view that diversification provides firms with a valuable intangible asset.