Abstract
Using daily data from CRSP and COMPUSTAT, this paper first confirms the cointegrated relation between the returns of equities in the US healthcare industry and the returns of market portfolio. Then we break down the risk premia of stocks of the healthcare sector into ten subgroups and reveal an anomaly compared to the Fama-French three-factor model. We find significantly negative coefficients of the risk loadings of the book-to-market ratio. Such anomaly is robust in the White heteroskedasticity-consistent control group and differently weighted market portfolio. As a unique countercyclical sector, growth stocks with lower book value in the healthcare industry are pertinent to stable portfolio performance. We also find non-zero Fama-French alpha in several subgroups, which implies the existence of unknown factors to explain the returns of healthcare assets.
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