Investment Choices: Indivisible non-Marketable Assets and Bounded Rationality
AbstractSeveral investment decisions deal with non-marketable assets. Nonmarketable 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 bounded rationality 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. That allows us to classify investors who can access a non-marketable investment as either entrepreneurs, who undertake it, or clerks, who invest their entire wealth on the market.
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Bibliographic InfoPaper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 07_11.
Date of creation: Jan 2011
Date of revision:
Portfolio Choice; Investment Decisions; Asset Indivisibility; Non-marketable Assets; Bounded Rationality;
Find related papers by 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-30 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Svensson, L.E.O., 1988.
"Portfolio Choice And Asset Pricing With Nontraded Assets,"
417, Stockholm - International Economic Studies.
- Lars E.O. Svensson, 1988. "Portfolio Choice and Asset Pricing With Nontraded Assets," NBER Working Papers 2774, National Bureau of Economic Research, Inc.
- Kerins, Frank & Smith, Janet Kiholm & Smith, Richard, 2004. "Opportunity Cost of Capital for Venture Capital Investors and Entrepreneurs," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 39(02), pages 385-405, June.
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