The rankings are based on annual surveys of citizens in each country, but researchers consider per-capita gross domestic product as one of the prime criteria for happiness, along with life expectancy, perceptions of corruption, support from relatives and friends, freedom to make life choices and charitable giving.
"You have to look at causation," said Warren Cormier, CEO of Boston Research Technologies and co-founder of the RAND Behavioral Finance Forum. "Does money lead to happiness, or do happy people end up making more money?"
He said both factors may be at play. "There is a link between happiness and stock market participation. Endorphins are released when people are happier, and this in turn leads among some people to an increased acceptance of risk," he said. Being happy doesn't necessarily make an individual more intuitive or skilled at investing, Cormier noted, but a country with a happier population could still see a boost in stock market performance due to the higher percentage of participation.
The happiest countries and 5-year performance
- Norway: (–5.87 percent)
- Denmark: 9.37 percent
- Switzerland: 5.88 percent
- Finland: 7.94 percent
- Netherlands: 10.41 percent
- Canada: (–0.89 percent)
- New Zealand: 3.6 percent
- Australia: (–0.16) percent
- Sweden: 4.21 percent
- United States: 11.34 percent
(Source: World Happiness Report from the Sustainable Development Solutions Network in association with the United Nations; performance data from MSCI standard index series of large/mid-cap stock country markets, as of 4/25/2017. Data for No. 3 in ranking Iceland is not available from MSCI. U.S., No. 14 in the ranking, included for comparison purposes.)
The United States scores in the top 10 percent among nations for happiness — though it did not make the top 10 in the rankings, slipping to 14th place this year. But U.S. stocks have generally done well compared to other markets, with the S&P 500 up a healthy 14.6 percent for the year ending April 25, according to MSCI. Norway, the happiest country, is up roughly 6.6 percent in the past year.
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ETFs targeting these countries can generate even better performance by concentrating stock picks to roughly 50 holdings or less. The Global X MSCI Norway Index (NORW) ETF specifically is up roughly 11.5 percent for the year through April 25, according to Morningstar, a big edge over the MSCI Norway Index. The iShares MSCI Denmark Capped Investable Market Index Fund (EDEN) returned 4.69 percent for the past year, through April 25. That compares to a return for the MSCI Denmark Index of –7.43 percent.
What happiness doesn't translate into is consistent performance, especially for countries where happiness and GDP are linked to natural-resource wealth, such as Norway and Canada. The impact of low oil prices in recent years has taken away as much as it gives to stock markets in these nations.