Why would stock prices be easier to calculate than bond prices, making it stock indexes easier to determine than bond indexes? I read that it has to do with the infrequency at which the bonds trade which makes up-to-date prices difficult to obtain, but I dont get the intuition behind this very well.
In: 3
Well, you kind of said it right there.
A lot of bonds are issued and just held.
An index will calculate the gain based on market prices, but a lot of bond issues just won’t trade at all, or many of them only trade over the counter, not in live bidding markets.
It’s also not uncommon for bonds to be swapped. Two companies will agree to exchange a fixed rate for a variable rate or something, and that price isn’t reflective of the true price.
There’s also other factors in bonds, such as convertibility that may make them not comperable to other bonds with similar stats.
Basically stocks are very liquid and all the same, Bonds aren’t as liquid and are too different from one another
Latest Answers