Are the Combinations of Health Care Sector and T-Bill One of the Best Choices for Investment?

28 Pages Posted: 27 Jun 2019

See all articles by Zhihui Lv

Zhihui Lv

Northeast Normal University - KLASMOE & School of Mathematics and Statistics

Amanda Chu

affiliation not provided to SSRN

Thomas Chinan Chiang

Drexel University - Department of Finance

Wing-Keung Wong

Asia University, Department of Finance

Date Written: June 25, 2019

Abstract

Health care sector plays an increasingly important role in the stock market because it is growing nearly in the entire period and has low correlation with the business cycle. On the other hand, T-Bill is also an important asset in investment because it has positive return and small variance. In this paper, we employ the mean-variance (MV) rules and stochastic dominance (SD) approach to investigate the portfolio performance with and without both health care sector and T-Bill in the US over the period from September 1986 to May 2017. The results show that all the portfolios with health care asset and 6-M TB significantly dominate the corresponding portfolios without health care and 6-M TB, regardless whether short sale is allowed. This study also concludes that the combinations of health care sector and 6-M TB not only reduce risk but also gain better return and all risk-averse investors prefer to invest in portfolios with health care sector and 6-M TB, regardless whether they buy long or sell short the market.

By employing the mean-variance (MV) rules and stochastic dominance (SD) approach, this paper investigates the portfolio performance with and without both health care sector and T-Bill in the U.S. market over the period from September 1986 to May 2017. The results show that all the portfolios with health care asset and 6-m TB significantly dominate the corresponding portfolios without health care and 6-m TB, regardless whether short sale is allowed. This study also concludes that the combinations of health care sector and 6-m TB not only reduce risk but also gain better return; all risk-averse investors prefer to invest in portfolios with health care sector and 6-m TB, regardless whether they buy long or sell short the market.

Keywords: Health Care Sector, T-Bill, Mean-Variance Portfolio Optimization, Mean-Risk Rules, Stochastic Dominance

JEL Classification: C4, D81, G11, I10

Suggested Citation

Lv, Zhihui and Chu, Amanda and Chiang, Thomas C. and Wong, Wing-Keung, Are the Combinations of Health Care Sector and T-Bill One of the Best Choices for Investment? (June 25, 2019). Available at SSRN: https://ssrn.com/abstract=3409672 or http://dx.doi.org/10.2139/ssrn.3409672

Zhihui Lv

Northeast Normal University - KLASMOE & School of Mathematics and Statistics

Changchun
China

Amanda Chu

affiliation not provided to SSRN

Thomas C. Chiang

Drexel University - Department of Finance ( email )

32nd & Chestnut Streets
Philadelphia, PA 19104
United States
215-895-1745 (Phone)

Wing-Keung Wong (Contact Author)

Asia University, Department of Finance ( email )

Taiwan
Taiwan

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
18
Abstract Views
299
PlumX Metrics