The Relationship Between Economic Policy Uncertainty and Serbian Stock Market Performance

Abstract

The stock market is often seen as an important indicator of the state of the economy, as it reflects the overall economic environment and the direction of its development, while at the same time it is influenced by numerous factors, including social, environmental and political circumstances. Therefore, it is of particular importance to analyze the impact of global economic policy uncertainty on the performance of stock markets, especially in the conditions of a changing macroeconomic environment. In this context, the aim of this research is to examine the relationship between the uncertainty of economic policy and the performance of the stock market in Serbia. In order to answer the goal of the research, data covering the period from 2012 to 2025 was used. The MSCI index was used as a measure of the performance of the stock market of the analyzed countries. The independent variable in the model is the Global Economic Policy Uncertainty Index (EPU). Also, World Governance Indicators are included in the model as explanatory variables. To examine the relationship between these variables, a regression analysis was conducted using the ordinary least squares (OLS) method. The results showed a significant negative impact of global economic instability on stock market performance, while the impacts of other variables are mostly significantly positive. Reducing global economic policy uncertainty is key to strengthening market stability, increasing investor confidence and encouraging domestic and foreign investment, which requires active measures by policy makers and market participants.