Manav Chaudhary

I am a graduate student in the Joint Program in Financial Economics at the University of Chicago, Booth School of Business and Kenneth C. Griffin Department of Economics. My research focuses on asset pricing, macrofinance, and regulation.


Contact: mchaudhary@chicagobooth.edu


You can find my CV here and learn about my research below.


I will be joining the London School of Economics Department of Finance in the upcoming academic year.

Job Market Paper

Regulator Beliefs

Modern financial regulations are forward-looking and operationally rely on regulator models to forecast future outcomes. As a result, through these models, regulations embed views about the future, which I term regulator beliefs. Using the US life insurance sector, I measure regulator and insurer interest rate expectations. Deriving regulator expectations from the economic model they prescribe for risk-based capital and policy reserve calculations, and gathering insurer expectations from investor call transcripts using a large language model. I document three stylized facts: (i) Regulators and insurers disagree about future yields, with disagreement exceeding 2pp for long-horizon expectations; (ii) Regulator expectations missed the decline in yields, but they predict future yields just as, if not more, accurately as professional forecasters and insurers; and (iii) Regulators and professional forecasters exhibit quantitatively similar belief-updating patterns, such as underreacting to new information. In line with large disagreements, I show that regulator expectations induce insurers to adjust their actions materially. Two quasi-experiments confirm that insurers rebalance portfolios to align with regulator expectations—adjusting portfolio duration by over 15%. Furthermore, insurers shift their reported expectations to be more aligned with the regulator—highlighting the need to consider the regulatory environment when interpreting institutional investors' reported beliefs. Finally, I extend the analysis to banks, demonstrating that shifts in Federal Reserve beliefs, due to their influence on stress test design, cause banks to adjust their capital allocations. Overall, the findings lay the groundwork for a broader agenda connecting regulator beliefs to financial institution decisions, asset prices, and financial stability.

Working Papers

Corporate Bond Multipliers: Substitutes Matter
R&R at  Review of Financial Studies
(with Zhiyu Fu and Jian Li)

Many economic questions require estimating the price impact of demand shifts (multipliers) in the bond market. Corporate bonds have salient characteristics that distinguish close versus distant substitutes. We show that accounting for the heterogeneous substitutability between bonds is critical for estimating multipliers correctly. By allowing for heterogeneous substitution, we find that security-level multipliers are essentially zero—an order of magnitude smaller than the estimate ignoring heterogeneous substitutability. Nonetheless, portfolio multipliers are substantially larger and monotonically increase with the aggregation level. Furthermore, we find that the multiplier is larger for high-yield bonds, longer-maturity bonds, and bonds with greater arbitrage risks.


Inflation Expectations and Stock Returns
(with Ben Marrow)

How do inflation expectations affect stock returns, and what accounts for this relationship? We directly measure investors' expectations using traded inflation-indexed contracts and show that, post-2000, stocks offer positive returns in response to higher expected inflation: unconditionally, a 10 basis point increase in 10-year breakeven inflation is associated with a 1.1% increase in the value-weighted stock index. Using a wide range of approaches, we show that this positive relationship is almost entirely due to aggregate variations in expected excess returns rather than changes in firm cash flows (e.g., due to higher mark-ups) or fluctuations in risk-free rates (e.g., due to expected monetary policy response). Overall, a risk premium “proxy” mechanism appears to explain this dominant role of expected excess returns: higher long-term inflation expectations signal stronger future economic growth and reduced volatility.


Anatomy of the Treasury Market: Who Moves Yields?
(with Zhiyu Fu and Haonan Zhou)

We develop a quantity-based framework to study the drivers of U.S. Treasury yields. Our method allows for flexible identification of price and factor sensitivities for heterogeneous investors in a demand-supply model using granular idiosyncratic shocks. Overall, a 1 percent demand increase for U.S. Treasury notes and bonds results in a 1 percent increase in prices, equivalent to a 10 basis points decline for the ten-year yield. We uncover substantial heterogeneity across investors and regimes in sectors' sensitivity to Treasury yield changes and aggregate factors. Using the estimated model, we decompose changes in Treasury yields over the past two decades, and document three main findings: (i) Contrasting to the conventional wisdom, foreign investors contribute little to Treasury price appreciation during flight-to-safety episodes; (ii) U.S. banks and foreign investors becomes more price insensitive after the global financial crisis, while the Federal Reserve has stepped up its role as a state-contingent liquidity provider; (iii) while major foreign Treasury holders are the biggest contributor to Treasury yield compression before the financial crisis, the influence of foreign demand on Treasury yields has substantially weakened since 2010.

Works in Progress

Regulator Belief Induced Minsky Cycles

Model-based constraints have become the dominant method for regulating intermediaries. These regulations require regulating model assumptions, which embed regulator beliefs about economic and financial variables into firm constraints. However, these regulator beliefs exhibit systematic biases, and due to their ability to coordinate firm decisions through intermediary constraints, they can amplify systemic risk (Chaudhary, 2024). This paper introduces regulator belief–dependent constraints in a Brunnermeier and Sannikov (2014) macrofinance model to study the systemic risk implications of such regulations. The model exhibits procyclical leverage and generates endogenous Minsky Cycles driven by regulators learning from recent data. During prolonged periods of stability, the regulator revises down their risk assessment, which relaxes intermediary constraints and endogenously amplifies risks. In times of crisis, elevated regulator risk assessment leads to tighter constraints, exacerbating the procyclicality of leverage and prolonging crisis episodes. Nevertheless, regulation induces less risk-taking by intermediaries compared to an economy without regulation, mitigating the severity of crises overall—resulting in more frequent but less severe crises.