An analysis of security price risk and return among publicly traded pharmacy corporations.
BACKGROUND
Community pharmacies have been subject to intense and increasing competition in the past several decades.


OBJECTIVE
To determine the security price risk and rate of return of publicly traded pharmacy corporations present on the major U.S. stock exchanges from 1930 to 2009.


METHODS
The Center of Research in Security Prices (CRSP) database was used to examine monthly security-level stock market prices in this observational retrospective study. The primary outcome of interest was the equity risk premium, with analyses focusing upon financial metrics associated with risk and return based upon modern portfolio theory (MPT) including: abnormal returns (i.e., alpha), volatility (i.e., beta), and percentage of returns explained (i.e., adjusted R(2)). Three equilibrium models were estimated using random-effects generalized least squares (GLS): 1) the Capital Asset Pricing Model (CAPM); 2) Fama-French Three-Factor Model; and 3) Carhart Four-Factor Model.


RESULTS
Seventy-five companies were examined from 1930 to 2009, with overall adjusted R(2) values ranging from 0.13 with the CAPM to 0.16 with the Four-Factor model. Alpha was not significant within any of the equilibrium models across the entire 80-year time period, though was found from 1999 to 2009 in the Three- and Four-Factor models to be associated with a large, significant, and negative risk-adjusted abnormal returns of -33.84%. Volatility varied across specific time periods based upon the financial model employed.


CONCLUSIONS
This investigation of risk and return within publicly listed pharmacy corporations from 1930 to 2009 found that substantial losses were incurred particularly from 1999 to 2009, with risk-adjusted security valuations decreasing by one-third.
Department of Pharmacy Practice and Science, The University of Arizona College of Pharmacy, 1295 North Martin Avenue, P.O. Box 210202, Tucson, AZ 85721-0202, USA. Electronic address: adrienne@pharmacy.arizona.edu.
Adrienne M
AM
Gilligan
Grant H
GH
Skrepnek
D003132:Commerce; D019981:Health Care Sector / Q000191:economics*; D010594:Pharmacies / Q000191:economics; D012306:Risk