Low Risk as a Predictor of Financial Crises

Jon Danielsson, Marcela Valenzuela and Ilknur Zer
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Ilknur Zer: https://www.federalreserve.gov/econres/ilknur-zer.htm

No 2018-05-09, FEDS Notes from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Reliable indicators of future financial crises are important for policymakers and practitioners. While most indicators consider an observation of high volatility as a warning signal, this column argues that such an alarm comes too late, arriving only once a crisis is already under way. A better warning is provided by low volatility, which is a reliable indication of an increased likelihood of a future crisis.

Date: 2018-05-09
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfn:2018-05-09

DOI: 10.17016/2380-7172.2169

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