Index of Economic Freedom and Market Return, from Charles Pennington
One might guess that the top-rated countries in terms of economic freedom would have the best performing markets going forward. To test the idea I took a look at the returns of all the iShares MSCI country funds from 12/31/1997 through today to see if there was any correlation between those returns and the Heritage Foundation Index of Economic Freedom scores as of 1997.The data are given below: the country, the economic freedom score, and the value today of $1 invested 12/31/1997. There is a correlation (-16%), but it goes the wrong way. The biggest winners were the not-so-free countries Mexico and Malaysia; in fact, Mexico was both the least free of all and the best performer of all. The most free countries, Hong Kong and Singapore, were near the middle of the pack.
FUND EconFreedom $1 grew to:
ISHARES INC MSCI BELG INVEST 64.6 $0.66
ISHARES INC MSCI NETHR INVES 70.4 $0.68
ISHARES INC MSCI ITALY 58.1 $0.91
ISHARES INC MSCI UTD KINGD 76.4 $0.92
ISHARES INC MSCI JAPAN 70.3 $0.94
ISHARES INC MSCI GERMAN 67.5 $1.08
ISHARES INC MSCI FRANCE 59.1 $1.15
ISHARES INC MSCI SWITZERLD 78.6 $1.19
ISHARES INC MSCI SWEDEN 63.3 $1.20
ISHARES INC MSCI HONG KONG 88.6 $1.36
ISHARES INC MSCI SPAIN 59.6 $1.43
ISHARES INC MSCI SINGAPORE 87.3 $1.48
ISHARES INC MSCI AUSTRIA INV 65.2 $1.62
ISHARES INC MSCI AUSTRALIA 75.5 $2.12
ISHARES INC MSCI MALAYSIA 66.8 $2.55
ISHARES INC MSCI MEX INVEST 57.1 $3.55