In this report, we discuss the models available for estimating the cost of equity for the purpose of  the Natural Gas Rules in Australia. Given that the new Rule 87 requires relevant estimation methods, financial models and market data to be considered, as well as the ―”prevailing conditions in the market for equity funds”, this report focuses on the characteristics of the various models, how they perform under various market conditions, and therefore how to assign weight to a method, model or other data based on prevailing market or industry conditions. Further, the report finds that practitioners, regulators, and textbooks commonly look to several models or data sources before reaching a conclusion on the cost of equity.

View Report