IDEAS home Printed from https://ideas.repec.org/a/spr/eujhec/v3y2002i1p47-53.html
   My bibliography  Save this article

Adapting portfolio theory for the evaluation of multiple investments in health with a multiplicative extension for treatment synergies

Author

Listed:
  • J. F. P. Bridges
  • M. Stewart
  • M. T. King
  • K. van Gool

Abstract

Portfolio theory is central to the analysis of risk in many areas of economics but is seldom used appropriately in health economics. This contribution examines the use of portfolio theory in the context of cost-effectiveness analysis (CEA). A number of modifications are needed to apply portfolio analysis to the economic evaluation of health care interventions. First, the method of reporting the results of a CEA, and consequently some of the underlying assumptions, needs to be modified. Second, portfolio theory needs to be expressed in terms of effects on individuals aggregated to a population. Finally, one needs to allow for the possibility of synergy between the various health interventions. This paper derives a general formula for a portfolio of health care interventions that allows for synergies between interventions where the population effects are aggregated from individual effects. A number of special cases are also derived to highlight the nature of the formulation of the modified portfolio theory. We conclude that, while modified portfolio theory adds a theoretical foundation to health care evaluations, it may not be operational until estimates of the correlation between interventions are available, and the question of uncertainty is resolved in health care evaluation. Also, while a synergy may be present at the individual level, when aggregated over a large population it may not be significant given the standard assumption of constant returns to scale. Copyright Springer-Verlag Berlin Heidelberg 2002

Suggested Citation

  • J. F. P. Bridges & M. Stewart & M. T. King & K. van Gool, 2002. "Adapting portfolio theory for the evaluation of multiple investments in health with a multiplicative extension for treatment synergies," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 3(1), pages 47-53, March.
    • Handle: RePEc:spr:eujhec:v:3:y:2002:i:1:p:47-53
    DOI: 10.1007/s10198-001-0090-5
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10198-001-0090-5
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10198-001-0090-5?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Oliver Gao, H. & Stasko, Timon H., 2009. "Diversification in the driveway: mean-variance optimization for greenhouse gas emissions reduction from the next generation of vehicles," Energy Policy, Elsevier, vol. 37(12), pages 5019-5027, December.
    2. E. Michael Foster & Michele M. Porter & Tim S. Ayers & Debra L. Kaplan & Irwin Sandler, 2007. "Estimating the Costs of Preventive Interventions," Evaluation Review, , vol. 31(3), pages 261-286, June.
    3. Dimitrios Bisias & Andrew W Lo & James F Watkins, 2012. "Estimating the NIH Efficient Frontier," PLOS ONE, Public Library of Science, vol. 7(5), pages 1-10, May.
    4. Elamin H. Elbasha, 2005. "Risk aversion and uncertainty in cost‐effectiveness analysis: the expected‐utility, moment‐generating function approach," Health Economics, John Wiley & Sons, Ltd., vol. 14(5), pages 457-470, May.
    5. John Bridges, 2006. "Lean Systems Approaches to Health Technology Assessment," PharmacoEconomics, Springer, vol. 24(2), pages 101-109, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:eujhec:v:3:y:2002:i:1:p:47-53. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.