diff --git a/tests/run-tests.py b/tests/run-tests.py
--- a/tests/run-tests.py
+++ b/tests/run-tests.py
@@ -134,7 +134,8 @@ def install_hg():
     vlog("# Performing temporary installation of HG")
     installerrs = os.path.join("tests", "install.err")
 
-    os.chdir("..") # Get back to hg root
+    # Run installer in hg root
+    os.chdir(os.path.join(os.path.dirname(sys.argv[0]), '..'))
     cmd = ('%s setup.py clean --all'
            ' install --force --home="%s" --install-lib="%s"'
            ' --install-scripts="%s" >%s 2>&1'