Dimitrios Bisias

 

Based on an empirical relationship between burden-of-disease as measured by years-of-life-lost (YLL) and funding levels from the National Institutes of Health (NIH) from 1980 to 2007, financial portfolio theory is used to estimate the risk/reward trade-offs of NIH funding allocations by treating appropriation as an investment, changes in YLL as investment returns, and estimating the means, variances, and covariance matrix of such disease-category returns using historical data.

These parameters are inputs to a mean-variance optimization procedure from which the efficient frontier---the set of allocations with the highest expected return for a given level of risk---is constructed. Such mean-variance-optimal allocations assign higher appropriations to diseases that cause premature death. The empirical results suggest that greater decrease in years of life lost per unit risk may be achievable using portfolio theory to guide NIH appropriations.