According to the study, at the Israeli Stock Exchange, corporate bond turnover is higher than that of stocks, and the number of transactions per day (approx. 70 per bond, on average) is much higher than the one in the United States (one to two transactions per day per bond, on average).
During the sample period, the daily average trading volumes in the corporate bond market were NIS 781 million (compared with NIS 958 million in stocks), with only 9.5% off-exchange transactions (comparable to stocks –10%). The turnover of corporate bonds was 55.5%, which is significantly higher than that of stocks (30.4%).
The bid-ask-spreads in the corporate bond market are low compared with the United States, but also compared with the Israeli stock market. In the small traders' transactions examined by the researchers, it was found that the average quoted half bid-ask spread for the relevant bond was 0.11% (in practice, execution costs were 0.067%, because some of the investors did not execute transactions against the spread, but rather placed orders at better prices). The two researchers have also found that the quoted bid-ask-spreads of corporate bonds were much lower than those of the corresponding stocks.
For comparison purposes, various studies published with respect to corporate bond trading in the United States showed that, in transactions of up to $5,000, the investors' trading costs were 0.75%, whereas the costs for investors of roughly $1 million was 0.09% - which is still higher than the trading costs of small investors in Israel.
The findings arising from the corporate bond market in Israel are, as aforesaid, materially different than its American counterpart, where the participation rate of private investors is extremely low and costs are tenfold higher than the costs in Israel.