Finance theory plays a role in many litigations and regulatory proceedings - from determining the cost of capital for regulated businesses to determining the magnitude of damages in litigation.

CEG offers leading international finance practitioners with both academic and industry specific experience.  Professor Grundy is one of the top finance academics in Australia and Dr Tom Hird is a recognised thought leader in the application of finance theory to determine the cost of capital for regulated businesses.  Advice by CEG economists, whether for regulators or businesses, has been instrumental in affecting cost of capital decisions for regulated businesses.  CEG economists also advise more widely to financial institutions and investment houses on finance strategy. 

Recent work by CEG economists includes analysis of:

• distortions in the market for government bonds leading to a downward bias in government bond yields as a proxy for the risk free rate;
• analysis of expected return in residential real estate and portfolio properties of diversification in residential real estate;
• stock market volatility in a heterogeneous information economy;
• the need for compensation for non-systemic risk in the presence of barriers to perfect diversification; 
• bias in the estimation of the yields on low rated and long dated corporate debt by CBA Spectrum;
• the value of imputation credits to equity investors in Australia;
• the appropriate term of the risk free rate to be used in the capital asset pricing model (CAPM) as applied to regulated businesses;
• the relevance of Fama and French's three factor model to the cost of capital for regulated businesses;
• the value of the equity beta for regulated businesses in Australia;
• the implications of using an international CAPM model on estimates of the cost of capital for Australian businesses; and
• the value of the market risk premium in Australia.