Stock Market Reactions to External Military Attacks: Evidence from Latin America in 2026

This paper studies how the Latin American stock market of Venezuela responded to an external military shock during late 2025 and early 2026. Using daily stock-index data for eight markets from 1 October 2025 to mid-March 2026, the paper combines dynamic event-study regressions with country and date fixed effects and a synthetic-control design. The primary outcome is the natural logarithm of the Venezuelan stock market level, while daily log returns are treated as a complementary but conceptually different outcome. Two event dates are evaluated in terms of military attacks: 27 December 2025 and 3 January 2026. The evidence indicates a large and persistent Venezuela-specific repricing in log levels after the shock window. For the 27 December specification, the event-study coefficients in log price are statistically indistinguishable from zero before the event, then rise sharply after the event day and peak around trading day +7 at about 1.293 log points. By contrast, the 3 January specification exhibits sizeable negative pre-trends in log price, suggesting that markets had already begun increasing prices before that date. Synthetic control estimates reinforce the same interpretation with average post-event gaps above 1.22 log points in both cases.