# Daníelsson, J., M. Valenzuela, and I. Zer (2018, January). Learning from history: Volatility and ﬁnancial crises. Review of Financial Studies 31, 2774–2805.

We study the effects of stock market volatility on risk-taking and financial crises by constructing a cross-country database spanning up to 211 years and 60 countries. Prolonged periods of low volatility have strong in-sample and out-of-sample predictive power over the incidence of banking crises and can be used as a reliable crisis indicator, whereas volatility itself does not predict crises. Low volatility leads to excessive credit build-ups and balance sheet leverage in the financial system, indicating that agents take more risk in periods of low risk, supporting the dictum that stability is destabilizing.''