Jessica A. Wachter

My research is in asset pricing, with a focus on the interaction between financial markets, the macroeconomy, and human cognition. A summary of my work on rare disasters appears in the NBER Reporter. Slides from a recent talk, Finance and the Unexpected, are available here.

Working papers

1. What investment data implies about the AI transition with Jonathan Wachter University of Pennsylvania, 2025 SSRN · Slides · Calculator
2. A theory of memory for items and associations with David Halperin, Beige Jin, and Michael J. Kahana University of Pennsylvania, 2025 PsyArXiv
3. Forecast-agnostic portfolios with Hongye Guo Universities of Hong Kong and Pennsylvania, 2025 SSRN
4. Correlation neglect and asset prices with Hongye Guo Universities of Hong Kong and Pennsylvania, 2025 SSRN
5. Navigating through fear and greed: The experience-driven disposition effect with Tai Lo Yeung, Rong Liu, Michael J. Kahana, and Yongjie Zhang Tianjin University and Universities of Pennsylvania and Svizzera Italiana, 2025 SSRN
6. Associative learning and representativeness with Michael J. Kahana and James D. Paron University of Pennsylvania, 2025 SSRN

Publications

1. Sovereign default and the decline in interest rates with Max Miller and James D. Paron Review of Financial Studies, forthcoming SSRN
2. Learning with rare disasters with Yicheng Zhu Quantitative Economics 16(4):1181–1221, 2025 SSRN
3. Is the United States a lucky survivor? A hierarchical Bayesian approach with Jules H. van Binsbergen, Sophia Hua, and Jonas Peeters Journal of Finance 80(4):2355–2388, 2025 Published · SSRN
4. “Superstitious” investors with Hongye Guo Review of Asset Pricing Studies 15(1):1–45, 2025 Published · Supplemental appendix · SSRN
5. Risks to human capital with Mehran Ebrahimian Management Science 71(3):2583–2622, 2024 Published · SSRN
6. A retrieved-context theory of investor decisions with Michael J. Kahana Quarterly Journal of Economics 139(2):1095–1147, 2024 Published · SSRN
7. Memory of past experiences and economic decisions with Ulrike Malmendier In Oxford Handbook of Human Memory, M. Kahana and A. Wagner, eds., pp. 2228–2260, Oxford University Press, 2024 Published · SSRN
8. Foreseen risks with Joao Gomes and Marco Grotteria Journal of Economic Theory 212, Article 105706, 2023 Published · Supplemental appendix
9. A model of two days: Discrete news and asset prices with Yicheng Zhu Review of Financial Studies 35(5):2246–2307, 2022 Published · Online appendix · SSRN
10. Cross-sectional skewness with Sangmin Oh Review of Asset Pricing Studies 12(1):155–198, 2022 Published · SSRN
11. Option prices in a model with stochastic disaster risk with Sang Byung Seo Management Science 65(8):3449–3469, 2019 Published · SSRN
12. Multivariate stochastic volatility modeling of neural data with Tung D. Phan, Ethan A. Solomon, and Michael J. Kahana eLife 8, 2019 Published
13. Cyclical dispersion in expected defaults with Joao Gomes and Marco Grotteria Review of Financial Studies 32(4):1275–1308, 2019 Published · Online appendix · SSRN
14. Pricing long-lived securities in dynamic endowment economies with Jerry Tsai Journal of Economic Theory 177:848–878, 2018 Published · SSRN
15. Do rare events explain CDX tranche spreads? with Sang Byung Seo Journal of Finance 73(5):2343–2383, 2018 Published · Online appendix · SSRN
16. Risk, unemployment, and the stock market: A rare-events based explanation of labor market volatility with Mete Kilic Review of Financial Studies 31(12):4762–4814, 2018 Published · Erratum · SSRN
17. Maximum likelihood estimation of the equity premium with Efstathios Avdis Journal of Financial Economics 125(3):589–609, 2017 Published · Online appendix · SSRN
18. Rare booms and disasters in a multi-sector endowment economy with Jerry Tsai Review of Financial Studies 29(5):1377–1408, 2016 Published
19. Disaster risk and its implications for asset pricing with Jerry Tsai Annual Review of Financial Economics 7:219–252, 2015 Published · Online appendix
20. What is the chance that the equity premium varies over time? Evidence from predictive regressions with Missaka Warusawitharana Journal of Econometrics 186:74–93, 2015 Published
21. Can time-varying risk of rare disasters explain aggregate stock market volatility? Journal of Finance 68:987–1035, 2013 Published
22. Using samples of unequal length in generalized method of moments estimation with Anthony W. Lynch Journal of Financial and Quantitative Analysis 48:277–307, 2013 JSTOR
23. The term structures of equity and interest rates with Martin Lettau Journal of Financial Economics 101:90–113, 2011 Published
24. Asset allocation Annual Review of Financial Economics 2:175–206, 2010 Published
25. Why do household portfolio shares rise in wealth? with Motohiro Yogo Review of Financial Studies 23:3929–3965, 2010 Published
26. Can mutual fund managers pick stocks? Evidence from their trades prior to earnings announcements with Malcolm Baker, Lubomir Litov, and Jeffrey Wurgler Journal of Financial and Quantitative Analysis 45:1111–1131, 2010 Published
27. Predictable returns and asset allocation: Should a skeptical investor time the market? with Missaka Warusawitharana Journal of Econometrics 148:162–178, 2009 Published
28. The declining equity premium: What role does macroeconomic risk play? with Martin Lettau and Sydney C. Ludvigson Review of Financial Studies 21:1653–1687, 2008 Published · Appendix · NBER working paper
29. Why is long-horizon equity less risky? A duration-based explanation of the value premium with Martin Lettau Journal of Finance 62:55–92, 2007 Published
30. A consumption-based model of the term structure of interest rates Journal of Financial Economics 79:365–399, 2006 Published
31. Solving models with external habit Finance Research Letters 2:210–226, 2005 Published
32. Does the failure of the expectations hypothesis matter for long-term investors? with Antonios Sangvinatsos Journal of Finance 60:179–230, 2005 Published
33. Risk aversion and allocation to long-term bonds Journal of Economic Theory 112:325–333, 2003 Published
34. Portfolio and consumption decisions under mean-reverting returns: An exact solution for complete markets Journal of Financial and Quantitative Analysis 37:63–91, 2002 Published
35. Should investors avoid all actively managed mutual funds? A study in Bayesian performance evaluation with Klaas P. Baks and Andrew Metrick Journal of Finance 56:45–86, 2001 Published

Other articles and prepared remarks

1. Translating research into public policy: Lessons from economists in government AEA Panel Remarks, 2025 Remarks
2. Doing research with an impact AFA Panel Remarks, 2025 Remarks
3. Conference on Financial Markets Regulation opening remarks 2024 Remarks
4. Testimony, House Financial Services Committee hearing: Oversight of the SEC's Division of Trading and Markets 2023 Testimony
5. Comment on “Imperfect expectations: Theory and evidence” In NBER Macroeconomics Annual 35, M. Eichenbaum and E. Hurst, eds., 2020 Published
6. Rare events and financial markets NBER Reporter 1:7–10, 2020 Published
7. Like it or not, isolationism is a mirage for U.S. Letter to the editor, The Wall Street Journal, August 12, 2016
8. Disaster risk and asset pricing with Jerry Tsai VoxEU, 2015 VoxEU
9. Can financial innovation help to explain the reduced volatility of economic activity? A comment Journal of Monetary Economics 53:151–154, 2006 Published
10. Are behavioral models structural? A comment Journal of Monetary Economics 49:229–233, 2002 Published
11. Discussion of “Variable selection for portfolio choice” Journal of Finance 56:1351–1355, 2001 Published