Low risk as a predictor of financial crises Dec 10 2019 17:00 languageMoneyScience
keyboard_arrow_downkeyboard_arrow_up Visit resource
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.