Mexican FlagOne 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


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