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

John Riveros-Gavilanes, Jeisson Riveros-Gavilanes, Rafael Amaya-Mejía, Sherif Hassan, Oluwaseun Samuel Oduniyi and Brenda Liseth Roa-Yaguara
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John Riveros-Gavilanes: M&S Research Hub
Jeisson Riveros-Gavilanes: Beijing Institute of Technology
Rafael Amaya-Mejía: Escuela Superior de Administracion Publica
Sherif Hassan: M&S Research Hub
Oluwaseun Samuel Oduniyi: M&S Research Hub
Brenda Liseth Roa-Yaguara: Escuela Superior de Administracion Publica

MSR Working Papers from M&S Research Hub institute

Abstract: 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.

Keywords: stock markets; geopolitical risk; event study; synthetic control; Latin America; Venezuela (search for similar items in EconPapers)
Pages: 21
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ris:msrwps:023333

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