The other morning on CNBC I caught an on-air guest positing a political/economic connection. The gist: He argued that healthcare stocks had been punished while Hillary Clinton was the presumptive Democratic nominee, and they would do much better now that it looked less likely she would get the nomination, let alone be President. There was, the guest argued, a healthcare "put" hurting the sector, one that was now dissipating.
Fair enough. Hillary Clinton has a reputation for wanting to make material and potentially profit-limiting change to the U.S. healthcare market, so it's easy to see why, at least superficially one might come to the above conclusion. But beyond making for amusing political/economic rhetoric, does the idea hold up? Is there a relationship between Hillary Clinton as Democratic nominee and the performance of healthcare stocks?
For starters, you might look at a scatter diagram of the Intrade prediction market's numbers for Hillary's likelihood of gaining the Democratic nomination versus the performance of the healthcare sector SPDR (NYSEARCA:XLV).
Based on the scatter diagram, you have to work awfully hard to make the Hillary healthcare "put" argument. It seems more or less like there are a bunch of XLV data points around low probability, and a bunch around high probability, and no discernable relationship with increasing nomination likelihood.
And it doesn't get better if you get marginally more analytical and throw a linear regression at the problem, with there being a crummy r^2 and F-score. Now, to be fair, if you really wanted to keeep banging away on the Hillary healthcase "put" you might try a logit regression, with a categorical dependent variable and a stratified independent variable, but you know what? I don't have the time or interest.