Study Finds Close Correlation Between Market Returns and Democracy Indicators

For some time now we have known that what’s good for society tends to be good for its markets too. Or that democracy is good for the markets, China being a big exception. Varieties of Democracy, or V–Dem, a venture of the University of Notre Dame and Sweden’s University of Gothenburg, has validated the broadly held views in a study, using over 150 social and democracy indicators, and stock market data on 173 countries, some going as far back as 1900.

“We have documented that, over a five- or ten-year time scale, there has historically been, on average, a consistent positive correlation between future returns of a country’s stock market and past changes of the same country’s indicators that...