Skip to Main Content

Over the last decade, investors in biotech and pharmaceutical companies have been taking risks that aren’t commensurate with the rewards. That’s what our new analysis of health care investing shows. Yet their contributions — and sacrifices — lead to important medical discoveries that benefit society as a whole.

A well-accepted principle for investing, called risk-reward parity, says that the expected returns on investments should be commensurate with the risks. In the second decade of the 21st century, investors with low appetite for risk were satisfied with 1% interest yields from U.S. Government bonds. Others, seeking higher returns, would have gambled in cryptocurrencies. No rational person, however, would have invested in an asset with an expected yield of U.S. government bonds that carried the risks of cryptocurrencies.

Unlock this article by subscribing to STAT+ and enjoy your first 30 days free!


Create a display name to comment

This name will appear with your comment