CAPM Session: The CAPM—should regulators be looking at alternatives?

The ACCC and other Australian regulators use a domestic capital asset pricing model to calculate the cost of equity capital in regulatory decisions. The CAPM, like any model, is based on a number of simplifying assumptions. These assumptions and the theory upon which the CAPM is based have been subject to an increasing number
of criticisms. Is it time for regulators to consider alternatives to the CAPM for regulatory decisions? What might those alternatives be? How might they be applied in a regulatory context?