1.1 INTRODUCTION TO THE TOPIC
This study deals with the relationship between share prices and sharedividends. Most financial textbooks point out that in a well-functioning capital marketthese two variables should be related (e.g. Brealey and Myers, 1986); the presentvalue of the share should be equal to the dividend stream discounted by the returnearned on securities of comparable risk. Of course, this simple relationship only holdsin a world of certainty where investors have access to perfect information. Nevertheless, Shiller (1981) demonstrates that a similar relationship should hold in aworld of uncertainty where investors have rational expectations.
1.2 SUBJECT BACKGROUND OF THE RESEARCH TOPIC