This paper analyzes how changes in government policy affect stock prices. The authors develop a general equilibrium model where uncertainty about government policy and the government's dual economic and non-economic motives play key roles. The government tends to change its policy after performance downturns in the private sector. Stock prices fall at the announcements of policy changes, on average. The price fall is expected to be large if uncertainty about government policy is large, as well as if the policy change is preceded by a short or shallow downturn. Policy changes increase volatility, risk premia, and correlations among stocks. The jump risk premium associated with policy decisions is positive, on average. The paper finds that stock prices fall at the announcement of a policy change unless the posterior mean of the old policy's impact is below a negative threshold. Stock prices rise if the government replaces an old policy so unproductive that its posterior mean falls below both thresholds. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The expected announcement return is negative, and it is more negative when there is more uncertainty about government policy. The paper also shows that the announcement returns are negative especially after downturns that are short or shallow. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about governmentThis paper analyzes how changes in government policy affect stock prices. The authors develop a general equilibrium model where uncertainty about government policy and the government's dual economic and non-economic motives play key roles. The government tends to change its policy after performance downturns in the private sector. Stock prices fall at the announcements of policy changes, on average. The price fall is expected to be large if uncertainty about government policy is large, as well as if the policy change is preceded by a short or shallow downturn. Policy changes increase volatility, risk premia, and correlations among stocks. The jump risk premium associated with policy decisions is positive, on average. The paper finds that stock prices fall at the announcement of a policy change unless the posterior mean of the old policy's impact is below a negative threshold. Stock prices rise if the government replaces an old policy so unproductive that its posterior mean falls below both thresholds. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The expected announcement return is negative, and it is more negative when there is more uncertainty about government policy. The paper also shows that the announcement returns are negative especially after downturns that are short or shallow. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government policy. The paper also shows that the expected announcement return is more negative when there is more uncertainty about government