The search for an economically sound procedure for estimating an appropriate rate of return on equity consistent with the Supreme Court's ruling in the Hope case [13] has led many economists, financial experts, and public service commissions to estimate the rate of return on equity with the capital asset pricing model (CAPM) (see [30], [19], and [21]). The popularity of the CAPM in regulatory proceedings was reported by Harrington [15] who, in a survey of public service commissions, found that 38 states were considering or had seen the CAPM used, two jurisdictions preferred the CAPM, Oregon required the CAPM, and South Carolina would require the CAPM in all future cases. Hence, given the popularity of the CAPM and the tremendous economic impact that outcomes of regulatory proceedings have on the financial well-being of both the regulated firm and the consumer, it is critical that if the CAPM is used in regulatory proceedings that it be applied in the best manner possible and that any limitations associated with the CAPM be recognized fully.

Roger P. Bey, Estimating the Optimal Stochastic Dominance Efficient Set with a Mean-Semivariance Algorithm, The Journal of Financial and Quantitative Analysis, Vol. 14, No. 5 (Dec., 1979), pp. 1059-1070

Yitzhaki [19] recently developed two portfolio selection criteria (EG and EΓ) based on the mean and Gini's mean difference. Similar to mean-variance(EV), the EG criterion uses two summary statistics to describe the probability distribution of a risky prospect, the mean and one-half Gini's mean difference. Gini's mean difference is defined as the average of the absolute differences between all possible pairs of observations of a random variable. Yitzhaki's development concentrated on the theoretical aspects of EG and EΓ and the theoretical relationships among EG, EΓ, EV, and stochastic dominance (SD) selection criteria. He did not address either the empirical properties of EG and EΓ or the relationship between the empirical efficient sets of EG and EΓ and other portfolio selection criteria. Yitzhaki suggested that the next step in the development and application of his proposed selection criteria should be an empirical investigation of how the EG and EΓ criteria compare with other selection criteria.

Sharpe's market model [29] is widely used both by academic researchers and practitioners in finance, but it cannot be accepted with complete confidence until some of its basic assumptions are tested more thoroughly. The applicability, usefulness, and reliability of the model are functions of its conformity to real data, which in turn depends partly on the unresolved question of heteroscedasticity.

R. Burr Porter, Roger P. Bey, David C. Lewis, The Development of a Mean-Semivariance Approach to Capital Budgeting, The Journal of Financial and Quantitative Analysis, Vol. 10, No. 4, 1975 Proceedings (Nov., 1975), pp. 639-649