Shanghai stock prices as determined by the present-value model

Derived from the present-value model of stock prices, our model implies tha t the log stock price is a linear function of expected log dividends and th e expected rate of growth of dividends where expectations are formed adapti vely. The model explains very well the prices of 47 stocks traded on the Sh anghai Stock Exchange observed at the beginning of 1996, 1997, and 1998. Th e estimated parameters are remarkably similar to those reported for stocks traded on the Hong Kong Stock Exchange and the New York Stock Exchange. (C) 1999 Academic Press.