In Australia’s case, an apparent rise in volatility in the 1980s mainly reflected the bond market becoming a real market again, rather than a captive arrangement for investors. Volatility of returns these days is comparable to the US results. 15  On this point, see remarks by Roger Ferguson, November 2005, at http://www.federalreserve.gov/boarddocs/speeches/2005/200511152/default.htm.
Strictly speaking, the volatility of equity returns is related not just to the volatilities of the flow of earnings and discount rates, but also the co-variance between earnings and discount rates.