Look at the big sports leagues around the world.

Most of the time, the same handful of teams tend to finish at the top. Just five teams have won the English Premier League since 2006 (Manchester United alone have been champions for half that time). The same number of teams have won the NBA championship in the last decade. And in China, Guangzhou Evergrande have been crowned champions of the Chinese Super League for six straight seasons.

Why? Good coaches attract good players, which in turn attracts good recruits… and nothing helps attract success like success.

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The best and worst performing markets in the world

But what about financial markets? If a market is up big one year, does that mean it’s going to continue to attract investment and move higher the next?

Of course, in markets (as in anything else for that matter), what happened yesterday may have no relationship with what happens tomorrow. However, the past can give us a clue about how a market will perform, as we’ve written before. And some markets do perform well on a consistent basis… while others often find themselves towards the bottom of the league.

To find the world’s best and worst performing markets, we looked at a broad range of 96 market indices over the two decades through 2016. Then, we calculated the number of times over that period that each index was either one of the world’s 10 best-performing or 10 worst-performing markets (in U.S. dollar returns).

The market appearing most frequently in the list of best-performing markets was Russia’s MICEX Index. The index, which tracks 50 of the most liquid Russian stocks on the Moscow Exchange, appeared seven times over two decades, as the table below shows. The stock markets of Slovakia, Mongolia, Indonesia and Hungary all followed with six top 10 finishes.

The index that appeared in the 10 worst-performing markets most often was the Ukraine PFTS, a benchmark index of the PFTS Stock Exchange. It made the list six times over two decades, as the table below shows. The stock markets of Greece, Cyprus and Japan – and also Mongolia, which features on both lists – were also among the worst performers.

What can we learn from these two tables?

  1. Small markets can be very volatile. Five of the nine markets represented are somewhere between microscopic in size, and tiny. Mongolia and Ukraine have total market capitalisations of just US$600 million (as much as an office building might cost in Singapore). Cyprus’s market capitalization is around US$2 billion; that’s around one-twentieth the market cap of Ford Motor, or Singapore’s DBS Group. Hungary weighs in at US$28 billion, or 3.5 percent the market capitalisation of Apple. And comparative heavyweights Russia and Indonesia, both close to US$500 billion, are still only about 60 percent the market cap of Apple.For markets this small, relatively low levels of investor inflows or outflows can destroy returns (or send them to the moon). Just a handful of investors getting involved in the market (or throwing their hands up in disgust and leaving) can almost single-handedly determine which list the market appears on in any given year. A slight change in sentiment, or a small off-index bet by a fund manager, can be the difference between being in the top 10 or the bottom 10 performers for the year.(Only Japan, with a market cap of US$5.8 trillion – or a bit more than double the market cap of the Hong Kong stock market (or more than seven times the size of Apple) is different here.)

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  1. Economic growth matters. In the short term, there’s little relationship between economic growth and stock market returns. Markets tend to price in economic growth, so a fast-growing economy today may not be a great market to invest in. However, over the long term, economic growth is critical to company earnings… it’s a lot more difficult to have a lot of fast-growing companies in an economy that’s moving at a snail’s pace. So it makes sense that the average economic growth of the countries with the better-performing stock markets is far higher than that of the worst-performing stock markets.This is clear in the average annual economic growth over the past 20 years of the markets that have made the most appearances in the top 10 list. The slowest growing economy in the group was Hungary, at just over 2 percent per year. Indonesia, Slovakia and Russia have all posted substantially higher growth rates.

Meanwhile, the fastest-growing economy in the bottom 10 performers – excepting outlier Mongolia, which appears in both the top 10 and the bottom 10 lists – is Cyprus, with average GDP growth of just over 2 percent per year. The economies of Ukraine, Japan and Greece have all grown on average at just around 1 percent per year over the past 20 years.

What does this tell us about the future?

Of course, the past has no bearing on the present… and looking in the rear-view mirror can hurt more than it helps. Today’s low-growth economies may recover to become tomorrow’s strong performers – and vice versa.

In coming days, we’ll be talking more about outperforming and underperforming economies – and what they mean for stock market returns. (See the P.S. below.)