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Investment choices: Indivisible non-marketable assets and suboptimal solutions

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  • Pattitoni, Pierpaolo
  • Savioli, Marco

Abstract

Several investment decisions deal with non-marketable assets. Non-marketable assets are available only to one investor and are often indivisible. This has relevant consequences on investor investment opportunities. Adhering to a mean–variance representation of the investment space and considering a non-marketable asset (divisible or not), we derive some possible investment scenarios an investor may face. Furthermore, we show how a limited ability to gather and process information affects investor portfolio choices. Our results define a set of conditions under which the non-marketable asset represents a good investment and show that, under certain assumptions, the efficient frontier exhibits non-linearities and intervals of discontinuity.

Suggested Citation

  • Pattitoni, Pierpaolo & Savioli, Marco, 2011. "Investment choices: Indivisible non-marketable assets and suboptimal solutions," Economic Modelling, Elsevier, vol. 28(6), pages 2387-2394.
    • Handle: RePEc:eee:ecmode:v:28:y:2011:i:6:p:2387-2394
    DOI: 10.1016/j.econmod.2011.06.027
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    References listed on IDEAS

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    Cited by:

    1. M. Savioli & R. Patuelli, 2016. "Social capital, institutions and policymaking," Working Papers wp1070, Dipartimento Scienze Economiche, Universita' di Bologna.
    2. Wang, Yahua & Xu, Feng & Hu, Angang, 2013. "Impact of heterogeneous beliefs and short sale constraints on security issuance decisions," Economic Modelling, Elsevier, vol. 30(C), pages 539-545.
    3. Candela, Guido & Castellani, Massimiliano & Pattitoni, Pierpaolo, 2013. "Reconsidering psychic return in art investments," Economics Letters, Elsevier, vol. 118(2), pages 351-354.
    4. Enrico Maria Cervellati & Pierpaolo Pattitoni & Marco Savioli, 2013. "Entrepreneurial Under-Diversification: Over Optimism and Overconfidence," Working Paper series 09_13, Rimini Centre for Economic Analysis, revised May 2016.
    5. E. M. Cervellati & P. Pattitoni & M. Savioli, 2016. "Cognitive Biases and Entrepreneurial Under-Diversification," Working Papers wp1076, Dipartimento Scienze Economiche, Universita' di Bologna.

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    More about this item

    Keywords

    Portfolio Choice; Investment Decisions; Asset Indivisibility; Non-marketable Assets; Suboptimal Solutions;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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