Private Placement Stock Pricing in Chinese Stock Market

We consider the problem of stock pricing in private placement in Chinese stock market. Inherent value and price discount are two critical factors that determine the stock price in private placement. Inherent value of stock is the basis of price and trade restriction result in price discount. This paper develops a pricing model for private placement in China. We introduce residual income method into our pricing model to estimate the inherent value of stock. Monte Carlo method is adopted to simulate the price discount in private placement. And result of empirical analysis shows that our model can effectively estimate the stock price in private placement in China.