The Impact of U.S. Elections on Stock Market Volatility: Latin America Analysis : Evidence from Six Major Latin American Equity Markets, 2000–2024

Sammanfattning

Political uncertainty originating in the United States may generate measurable effects in LatinAmerican financial markets, given the strong economic and financial integration between thetwo regions. The purpose of this study is to examine whether U.S. presidential electionsproduce abnormal increases in stock market volatility across six major Latin Americanmarkets: Brazil, Mexico, Chile, Peru, Colombia, and Argentina, and whether these effectsdiffer across countries. By employing a volatility event study methodology combined withGARCH (1,1) modelling across seven electoral cycles from 2000 to 2024. The analysis shows that the impact of U.S. elections on Latin American volatility is notconstant, but conditional on the degree of electoral surprise and the prevailing macroeconomicenvironment. Statistically significant abnormal volatility is documented for the 2008, 2012,and 2016 elections, while the 2000, 2004, and 2024 cycles produce no significant effects. Theresults also reveal substantial cross-country heterogeneity: Argentina and Mexico exhibit thehighest average abnormal volatility responses, while Chile records the lowest, consistent withthe dampening role of stronger institutional frameworks. These findings contribute tounderstanding how external political shocks are transmitted to emerging market equities andcarry implications for institutional investors and policymakers managing exposure to U.S.electoral uncertainty.