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Annualized Standard Deviation of Holding-Period Return 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Short- and Long-Term Volatility of Real Returns

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Annualized Standard Deviation of Holding-Period Return 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Short- and Long-Term Volatility of Real Returns on Stocks, Bonds and Bills Long-Term Annual Data (1890-1995) 10 20 30 40 50 Holding Period, in Years 60 70 10 -T-bills, rolled Equities Long bond, rolled Bond held to mat. k 60 80 90

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