Wharton School Professor Leads SEC Division of Economic and Risk Analysis

Jessica Wachter of the University of Pennsylvania's Wharton School has been named director of the Securities and Exchange Commission's Division of Economic and Risk Analysis (DERA), which provides multi-disciplinary research and analytical support for policy, enforcement and other activities across the financial-markets regulatory agency.

Wachter, who is Dr. Bruce I. Jacobs Professor in Quantitative Finance at the Wharton School and a research associate with the National Bureau of Economic Research, succeeds S.P. Kothari as DERA director, which comes with the chief economist title. Kothari, of the MIT Sloan School of Management, and Wachter are, respectively, the fifth and sixth academics to take leave from university positions to lead DERA since it was established in 2009, in the wake of the global financial crisis.

Wachter is the first woman in the role, though DERA has been headed on an interim basis, between permanent directors, by deputy director and deputy chief economist Chyhe Becker.

Monitoring COVID Effects

Kothari served from March 2019 until January 2021, when then-acting SEC chairman Elad Roisman praised him for having “played a key role in the commission's efforts to monitor the markets for the unfolding effects of COVID-19 and related government responses.” Kothari presided over an October 2020 roundtable on interconnectedness and risk in U.S. credit markets, as well as an 87-page report on that subject. COVID-19 uncertainties also figured prominently in the DERA Economic and Financial Outlook, published in February 2021.

Wachter's appointment was announced May 3, 16 days after Gary Gensler, the new SEC chairman, was sworn in. Gensler's first major division-level designation, of Enforcement director Alex Oh on April 22, did not go smoothly: She resigned April 28 for personal reasons, reportedly over a question of conduct in a case involving Exxon Mobil, leaving Melissa Hodgman as acting director of the Division of Enforcement.

Regarding Wachter, Gensler said, "For centuries, capital markets have evolved by adapting to technological innovation and the emergence of new data sources. It is essential that we apply rigorous economic analysis to ensure that our policymaking, enforcement decisions, and examinations are informed by the data we have available to us. Jessica Wachter is an exceptional economist who has completed wide-ranging research on issues critical to the SEC's mission. The commission and the capital markets will benefit from her extensive experience and stellar track record in the field of financial economics.”

Gensler also expressed thanks to “Chyhe Becker for her leadership of DERA as acting chief economist, and [I] look forward to our continued work together."

Financial Market Researcher

Described by the SEC as “one of the leading academic researchers on financial markets,” Wachter has an AB degree in mathematics (1996) and PhD in business economics (2000) from Harvard University, and taught at New York University's Stern School of Business before joining the Wharton School faculty, initially as a visiting assistant professor in 2003. She was Richard B. Worley Professor of Financial Management from 2014 to 2020 and has held her current quantitative finance chair since 2020.

According to Wachter's faculty page, “Her research interests include asset pricing models that incorporate rare events and behavioral finance.” Recent working papers include Sovereign Default and the Decline in Interest Rates, with Max Miller and James Paron; and Risks to Human Capital, with Mehran Ebrahimian.

A Knowledge@Wharton article, How Superstition Triggers Stock Price Volatility, elaborates on a study by Wachter and Hongye Guo.

"I am honored to be joining the SEC and the dedicated experts within DERA," Wachter said in a statement. "Sound economic and statistical analysis is critical to the SEC's mission, and I greatly look forward to working with the team to inform decision-making at the agency."

Wachter's parents are distinguished University of Pennsylvania faculty members Michael L. Wachter, William B. and Mary Barb Johnson Professor of Law and Economics; and Susan M. Wachter, Albert Sussman Professor of Real Estate, who from 1998 to 2001 was assistant secretary for policy development and research, U.S. Department of Housing and Urban Development.