08-2010:Leveraged ETFs, Holding Periods and Investment Shortfalls
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06-2010:The Risks of Preferred Stock Portfolios
05-2010:Oppenheimer Champion Income Fund
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09-2009:Leveraged Municipal Bond Arbitrage: What Went Wrong?
07-2009:Charles Schwab YieldPlus Risk
01-2009:Regions Morgan Keegan: The Abuse of Structured Finance
09-2008:An Economic Analysis of Equity-Indexed Annuities
06-2007:A CMO Primer: The Law of Conservation of Structured Securities Risk
06-2007:Closed-end Fund IPOs
06-2007:Corporate and Municipal Bonds
06-2007:Mandatory Arbitration of Securities Disputes
12-2006:Are Structured Products Suitable for Retail Investors?
06-2006:An Overview of Equity-Indexed Annuities
12-2005:Annuities
06-2005:Optimal Exercise of Employee Stock Options and Securities Arbitrations
12-2004:Concentrated Investments, Uncompensated Risk and Hedging Strategies
06-2004:The Use of Leveraged Investments to Diversify a Concentrated Position
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09-2003:Churning - Revisited: Trading Cost and Control
06-2003:Detecting Personal Trading Abuses
12-2002:Securities Class Action Lawsuits
06-2002:The Suitability of Exercise and Hold
12-2001:Churning
06-2001:Bid-Ask Spread, Sales Credits and Brokers' Compensation
12-2000:Churning - Brief Discussion
06-2000:McCann On Trading Models
Corporate and Municipal Bonds

Date: 06-2007
Author: Michael Piwowar

Corporate and municipal bonds are substantially more expensive for retail investors to trade than similar-sized trades in common stocks. Trading costs including explicit commissions, mark-ups and mark-downs are significantly higher for retail-sized (small) bond trades than for institutional-sized (large) bond trades. Dr. Piwowar summarizes key findings in the academic finance literature on bond market trading costs, including research on the effects of adding price transparency to the bond markets, and explains how bond trading costs can be hidden in realistic examples using simple numerical examples.


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