There is evidence that the bond market may be less efficient than the stock market.

Question

Quizplus · Accepted Answer

There is evidence that the bond market may still be less efficient than the stock market (as viewed in terms of short-term trading profits). The reason behind this belief is that the stock market is heavily weighted toward being a secondary market, in which existing issues are constantly traded between investors. The bond market is more of a primary market, with the emphasis on new issues. Thus, bond investors are not constantly changing their portfolios with each new action of the corporation. Many institutional investors, such as insurance companies, are not active bond traders in existing issues but, instead, buy and hold bonds to maturity.

There Is Evidence That the Bond Market May Be Less