RT Journal Article
SR Electronic
T1 Health Care Investing: Is a Higher Dose of Health Care
Good for the Portfolio?
JF The Journal of Investing
FD Institutional Investor Journals
SP 53
OP 66
DO 10.3905/joi.2014.23.1.053
VO 23
IS 1
A1 Jiri Tresl
A1 Brian C. Payne
A1 Gordon V. Karels
YR 2014
UL https://pm-research.com/content/23/1/53.abstract
AB The health care industry has grown five-fold as a percentage of total U.S. market capitalization since 1930 and has been a relevant economic force in the U.S. equity markets since the mid-1980s. This study analyzes the health care industry as an investment opportunity and finds that overweighting the U.S. equity portion of a portfolio toward health care generates greater returns, enhanced diversification, and positive alphas. In terms of risk and return, the industry also expands the attainable set of investment portfolios beyond those formed using other major industries’ equities. Over the past 25 years, health care industry returns have generated an annual alpha of 180 (360) basis points over the CAPM (four-factor model). These appealing aspects of the health care sector suggest that a slightly increased dosage of health care in a portfolio “did no harm.”TOPICS: Security analysis and valuation, factor-based models, equity portfolio management