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Presidential Approval Ratings and Stock Market Performance in Latin America

Author

Listed:
  • Yuvana Jaichand

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

  • Renee van Eyden

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

Abstract

This paper examines the time-varying causality between presidential approval ratings and stock market performance, as measured by stock returns and realised volatility, in Latin America over the monthly period 1990M01 to 2016M05. Our study focuses on four prominent Latin American countries, Brazil, Chile, Colombia, and Mexico. While the standard constant parameter causality test does not reveal significant evidence of causality, the time-varying analysis uncovers bidirectional causal relationships persisting throughout the sample period. Moreover, our results remain robust when controlling for macroeconomic conditions and presidential approval ratings in other Latin American countries, using principal component analysis to construct these control variables. Furthermore, we explore the impact of US presidential approval ratings on Latin American stock market performance and presidential approval ratings. Our analysis reveals a significant causal impact of US presidential approval ratings on both Latin American presidential approval ratings and stock market performance. Our findings underscore the significant role of US presidential approval ratings in understanding global stock market dynamics and contagion effects.

Suggested Citation

  • Yuvana Jaichand & Renee van Eyden & Rangan Gupta, 2024. "Presidential Approval Ratings and Stock Market Performance in Latin America," Working Papers 202411, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202411
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    References listed on IDEAS

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    More about this item

    Keywords

    Presidential approval ratings; stock returns; stock market volatility; time-varing causality;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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