Using the Baker, Bloom, and Davis (2013) news-based measure to capture economic policy uncertainty (EPU) in the United States, we find that when EPU increases by 1%, contemporaneous market returns fall by 5.5% and economy-wide monthly implied cost of equity capital rises by 85 basis points. The economy-wide dividend yield rises as well. We attribute the market-wide price decline to discount rate shocks, as dividends are unaffected for up to two years. In the cross-section, an EPU-based long-short portfolio earns positive abnormal returns of 41 basis points per month with respect to the Fama-French Three Factor model. These findings suggest that EPU is an important risk factor for equities.