Skip to main content

Advertisement

Log in

The financial performance of the health care industry: a global, regional and industry specific empirical investigation

  • Original Paper
  • Published:
The European Journal of Health Economics Aims and scope Submit manuscript

Abstract

This article analyzes the financial (out-) performance of all listed health care companies. The health care sector outperformed the market in the period from 2000 to June 2015. The performance was driven by companies from Americas, and Asia as well as companies from the pharmaceuticals sub-segment. Additionally, bull periods appear to be the main driver for the outperformance. Euro-based investors can expect different outcomes of their investments to those of USD investors. However, the main trends remain unchanged.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Subscribe and save

Springer+ Basic
EUR 32.99 /Month
  • Get 10 units per month
  • Download Article/Chapter or Ebook
  • 1 Unit = 1 Article or 1 Chapter
  • Cancel anytime
Subscribe now

Buy Now

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Fig. 1

Similar content being viewed by others

Notes

  1. For more details see http://www.eiu.com/industry/Healthcare.

  2. Previous studies on health care used the SIC (Standard Industrial Classification) codes for their stock selection. As our analysis is global, we cannot use a code that is only available for US companies.

  3. Andrea Frazzini’s data library is accessible via http://www.econ.yale.edu/~af227/data_library.htm.

  4. We excluded the Australia sample as the number of companies is too low in order to obtain a trustworthy result.

References

  1. DiMasi, J.A., Hansen, R.W., Grabowski, H.G.: The price of innovation: new estimates of drug development costs. J. Health Econ. 22, 151–185 (2003)

    Article  PubMed  Google Scholar 

  2. Kola, I., Landis, J.: Can the pharmaceutical industry reduce attrition rates? Nat. Rev. Drug Discov. 3, 711–716 (2004)

    Article  CAS  PubMed  Google Scholar 

  3. Adams, C.P., van Brantner, V.: Estimating the cost of new drug development: is it really $802 million? Health Aff. 25, 420–428 (2006)

    Article  Google Scholar 

  4. Adams, C.P., van Brantner, V.: Spending on new drug development. Health Econ. 19, 130–141 (2010)

    Article  PubMed  Google Scholar 

  5. DiMasi, J.A., Grabowski, H.G., Hansen, R.W.: Innovation in the pharmaceutical industry: new estimates of R&D costs. J. Health Econ. 47, 20–33 (2016)

    Article  PubMed  Google Scholar 

  6. Trsel, J., Payne, B., Karels, G.: Health care investing: is a higher dose of health care good for the portfolio? J. Invest. 23, 53–66 (2014)

    Article  Google Scholar 

  7. Bredthauer, J., Payne, B., Tresl, J., Karels, G.: Presidential parties, monetary regimes, and health care returns. Managerial Finance 41, 1059–1076 (2015)

    Article  Google Scholar 

  8. Fama, E.F., French, K.R.: Industry costs of equity. J. Finance Econ. 43, 153–193 (1997)

    Article  Google Scholar 

  9. Hong, H., Torous, W., Valkanov, R.: Do industries lead stock markets? J. Finance Econ. 83, 367–396 (2007)

    Article  Google Scholar 

  10. Guirguis, H.S., Onochie, J., Rosen, H.: The post-offering performance of IPOs in the health care industry. J. Econ Finance 25, 194–205 (2001)

    Article  Google Scholar 

  11. Dellva, W.L., DeMaskey, A.L., Smith, C.A.: Selectivity and market timing performance of fidelity sector mutual funds. Finance Rev. 36, 39–54 (2001)

    Article  Google Scholar 

  12. Nofsinger, J., Varma, A.: Socially responsible funds and market crises. J. Bank. Finance 48, 180–193 (2014)

    Article  Google Scholar 

  13. Aggarwal, R., Klapper, L., Wysocki, P.D.: Portfolio preferences of foreign institutional investors. J. Bank. Finance 29, 2919–2946 (2005)

    Article  Google Scholar 

  14. Markowitz, H.: Portfolio selection. J. Finance 7, 77–91 (1952)

    Google Scholar 

  15. Carhart, M.M.: On persistence in mutual fund performance. J. Finance 52, 57–82 (1997)

    Article  Google Scholar 

  16. Sharpe, W.F.: Capital asset prices: a theory of market equilibrium under conditions of risk. J. Finance 19, 425–442 (1964)

    Google Scholar 

  17. Lintner, J.: The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets. Rev. Econ. Stat. 47, 13–37 (1965)

    Article  Google Scholar 

  18. Mossin, J.: Equilibrium in a capital asset market. Econometrica 34, 768–783 (1966)

    Article  Google Scholar 

  19. Fama, E.F., French, K.R.: The cross-section of expected stock returns. J. Finance 47, 427–465 (1992)

    Article  Google Scholar 

  20. Fama, E.F., French, K.R.: Common risk factors in the returns on stocks and bonds. J. Finance Econ. 33, 3–56 (1993)

    Article  Google Scholar 

  21. Lesser, K., Rößle, F., Walkshäusl, C.: Socially responsible, green, and faith-based investment strategies: screening activity matters! Finance Res. Lett. 16, 171–178 (2016)

    Article  Google Scholar 

  22. Newey, W.K., West, K.D.: A simple, positive semi-definite, heteroskedasticity and autocorrelationconsistent covariance matrix. Econometrica 55, 703–708 (1987)

    Article  Google Scholar 

  23. Fama, E.F., French, K.R.: Size, value, and momentum in international stock returns. J. Finance Econ. 105, 457–472 (2012)

    Article  Google Scholar 

  24. Griffin, J.M.: Are the Fama and French factors global or country specific? Rev. Financial Stud. 15, 783–803 (2002)

    Article  Google Scholar 

  25. Black, F.: Beta and return. J. Portfolio Manag. 20, 8–18 (1993)

    Article  Google Scholar 

  26. Luce, B.R., Mauskopf, J., Sloan, F.A., Ostermann, J., Paramore, L.C.: The Return on Investment in Health Care: from 1980 to 2000. Value Health 9, 146–156 (2006)

    Article  PubMed  Google Scholar 

  27. Pritchard, C., Wallace, M.S.: Comparing the USA, UK and 17 Western countries’ efficiency and effectiveness in reducing mortality. JRSM short reports 2, 60 (2011)

    Article  PubMed  PubMed Central  Google Scholar 

  28. Weinstein, M.C., Skinner, J.A.: Comparative effectiveness and health care spending—implications for reform. New Eng. J. Med. 362, 460–465 (2010)

    Article  CAS  PubMed  PubMed Central  Google Scholar 

  29. Grabowski, H., Vernon, J.: Returns to R&D on new drug introductions in the 1980s. J. Health Econ. 13, 383–406 (1994)

    Article  CAS  PubMed  Google Scholar 

  30. Pammolli, F., Magazzini, L., Riccaboni, M.: The productivity crisis in pharmaceutical R&D. Nat. Rev. Drug Discov. 10, 428–438 (2011)

    Article  CAS  PubMed  Google Scholar 

  31. DiMasi, J.A., Feldman, L., Seckler, A., Wilson, A.: Trends in risks associated with new drug development: success rates for investigational drugs. Clin. Pharmacol. Ther. 87, 272 (2010)

    Article  CAS  PubMed  Google Scholar 

  32. Grabowski, H., Vernon, J., DiMasi, J.A.: Returns on research and development for 1990s new drug introductions. Pharmacoeconomics 20, 11–29 (2002)

    Article  PubMed  Google Scholar 

  33. National Institute on Aging: Global health and aging. National Institute on Aging, National Institutes of Health, Washington (2011)

    Google Scholar 

  34. Fricke, F.-U., Wähling, S., vd Schulenburg, J.-M.G.: The future Market for Pharmaceutical products in Germany. HEPAC Health Econ. Prev. Care, 28–34 (2000). doi:10.1007/s101980070021

  35. Kiencke, P., Daniel, D., Grimm, C., Rychlik, R.: Direct costs of Alzheimer’s disease in Germany. Eur. J. Health Econ. 12, 533–539 (2011)

    Article  PubMed  Google Scholar 

  36. Bickel, H.: Dementia in advanced age. Estimating incidence and health care costs. Zeitschrift fur Gerontologie und Geriatrie 34, 108–115 (2001)

    Article  CAS  PubMed  Google Scholar 

  37. Jokung, O., Macé, S.: Long-term health investment when people underestimate their adaptation to old age-related health problems. Eur. J. Health Econ. 14, 1003–1013 (2013)

    Article  PubMed  Google Scholar 

  38. Yashin, A.I., Arbeev, K.G., Arbeeva, L.S., Wu, D., Akushevich, I., Kovtun, M., Yashkin, A., Kulminski, A., Culminskaya, I., Stallard, E.: How the effects of aging and stresses of life are integrated in mortality rates. Insights for genetic studies of human health and longevity. Biogerontology 17, 89–107 (2016)

    Article  PubMed  Google Scholar 

  39. Bunker, J.P.: The role of medical care in contributing to health improvements within societies. Int. J. Epidemiol. 30, 1260–1263 (2001)

    Article  CAS  PubMed  Google Scholar 

  40. Diel, R., Rappenhöner, B.: The cost structure of illness due to hepatitis A in Germany. HEPAC Health Economics in Prevention and Care 1, 20–25 (2000)

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Gregor Dorfleitner.

Ethics declarations

Ethical standards

This analysis is based entirely on publicly available data. Our primary data source is Datastream, which is a global financial and macroeconomic data platform available for a license fee. However, it is possible to generate the dataset also with other sources. Therefore, no specific ethical approval is required.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Dorfleitner, G., Rößle, F. The financial performance of the health care industry: a global, regional and industry specific empirical investigation. Eur J Health Econ 19, 585–594 (2018). https://doi.org/10.1007/s10198-017-0904-8

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10198-017-0904-8

Keywords

JEL Classification

Navigation