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DISCUSSION PAPER PI-0715

Do Health Care Investments Hedge Health Care Liabilities?

William W. Jennings, Steve P. Fraser & Brian C. Payne

We examine whether health care equity investments hedge health care liabilities. In contrast with conventional wisdom, we find them uncorrelated and, thus, poor hedges.

Key words: Portfolio choice, mean-variance optimization, asset allocation, pension, liability-driven investment, non-profit investment, health-care financing