Economic Policy Uncertainty and Stock Market Performance: The Role of CSR

Sammanfattning: This research study aims to examine the association between economic policy uncertainty (EPU) and stock market performance, and to investigate whether corporate social responsibility (CSR) has an impact on this relationship. The dataset used in this study comprises firms listed on the S&P 500 index from 2013 to 2022 and is applied on two models, the Capital Asset Pricing Model and Fama French Three Factor Model. The results indicate a significant negative relationship between EPU and weighted stock market returns on a portfolio level in both models. When constructing portfolios based on the firm's CSR score over the years, the study finds that this negative relationship persists for all portfolios except for the best-performing CSR quartile, where the EPU factor becomes insignificant. The findings thus confirm previous literature by concluding a negative relationship between EPU and stock market performance, and provides additional perspectives to the CSR literature by demonstrating that CSR may protect shareholder value during uncertain times through the trust it entails.