How are financial markets pricing the monetary policy outlook? We use surveys to decompose excess returns on money market instruments into expectation errors and term premia. Excess returns are primarily driven by expectation errors, whereas term premia are negligible. Investors face challenges when learning about the Federal Reserve’s response to large, but infrequent, negative shocks in real-time. Rather than reflecting risk compensation, excess returns stem from investors underestimating how much the central bank eases policy in response to such rare shocks. We show, for the US and internationally, that expectation errors imply excess return predictability from past stock returns.

金融市场如何为货币政策前景定价？我们使用调查将货币市场工具的超额收益分解为预期误差和期限溢价。超额收益主要由预期误差驱动，而期限溢价可以忽略不计。投资者在实时了解美联储对大规模但不常见的负面冲击的反应时面临挑战。超额回报不是反映风险补偿，而是源于投资者低估了央行为应对这种罕见的冲击而放松政策的程度。我们表明，对于美国和国际而言，预期误差意味着过去股票回报的超额回报可预测性。