Presidential Approval Ratings and Stock Market Performance in Latin America

Yuvana Jaichand (), Renee van Eyden () and Rangan Gupta
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Yuvana Jaichand: Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa

No 202411, Working Papers from University of Pretoria, Department of Economics

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.

Keywords: Presidential approval ratings; stock returns; stock market volatility; time-varing causality (search for similar items in EconPapers)
JEL-codes: C32 G10 G17 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2024-03
New Economics Papers: this item is included in nep-fmk and nep-ifn
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:202411

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