Bond investors can waste a lot of money and not even know it.
They lost about US$667 million in the year ended March 31 by paying higher prices for corporate bonds that were available at lower prices elsewhere, according to September research by Larry Harris, a business professor at the University of Southern California.
In most of the deals, the investors simply did not know that the lower prices existed because they rely on human traders to tell them the value of bonds at any given moment before they make a trade. (Not to mention the salaries they need to pay those brokers to work the phones to find out who holds what and who might want to sell.)
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