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Read the article by Prof. Jie Gan carefully and address the following questions.

1. What weighting scheme is used to construct the Shanghai Composite index?

2. Around what time was the Shanghai index the highest (around 6,000)? What is its current level? What’s the percentage change? Around what time within the past 60 months was the Shanghai index the highest and the lowest, respectively? What’s the percentage change?

3. Suppose the market’s PE ratio was around 80. Use this number and explain the statement “if earnings continued to grow at 50%, in three years the PE would be around 20 and in line with the international markets.”