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In recent years, an increasing portion of consumer expenditures on services is allocated to healthcare. The aging of the U.S. population, the Affordable Healthcare Act, and the rising per unit costs of hospital trips all have influenced this trend. In this study, we test the hypothesis that healthcare sector prices covary directly with consumer expenditures on healthcare services. Using regression analysis, we regress 5 Healthcare sector ETF's on Healthcare consumption expenditures. The ETF's are: (1) Healthcare Sector ETF (XLV), (2) Healthcare Equipment ETF (XHE), (3) Biotech ETF (XBI), (4) Pharmaceuticals ETF (XHP), and (5) Healthcare Services ETF (XHS). Quarterly data are used in the analysis and the time period is from 2004 - 2014. We expect b>0, t-statistics>2, and R2 is significantly different from zero.

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Project Designation

Independent Research

Primary Advisor

Trevor C Collier

Primary Advisor's Department

Economics and Finance


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A Covariance Analysis of Consumer Healthcare Expenditures and Healthcare Sector Price Movements