Presenter(s)

Nicholas John Mulvihill

Comments

Presentation: 9:00-10:15, Kennedy Union Ballroom

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Description

In this study, I want to determine the long-term effect on returns to a portfolio of Health Care stocks when firm revenue and operating profits growth are the principal weighting factors. I use the top 20 stocks by market cap in the Health Care Sector as my portfolio. Rather than following the standard approach of using an equal weight strategy for the base model and then adjusting the weights based on yearly revenue and operating profits growth, I use the 10-year compound annual growth rate in revenue and operating profits for the top 20 stocks as my base model weighting factors. Yearly growth rates in revenue and operating profits are used to adjust the stock weights year over year. I backtest the model for the period 2009-2023 and then use the out-of-sample period 2020-2023 to determine if both momentum and persistence in performance for the Health Care Sector portfolio occur in this highly volatile market period. My benchmark for performance is the S&P 500 ETF SPY. Returns above this broad market benchmark indicate that revenue and operating profits are priced in risk factors.

Publication Date

4-17-2024

Project Designation

Independent Research

Primary Advisor

Robert D. Dean, Jon A. Fulkerson, Henry G. Willmore

Primary Advisor's Department

Economics and Finance

Keywords

Stander Symposium, School of Business Administration

Institutional Learning Goals

Scholarship

An Analysis of Returns to a Portfolio of Health Care Stocks with Firm Revenue and Gross Operating Profits as the principal weighting factors: An Empirical Analysis 2009-2023

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