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Investment Choices: Indivisible non-Marketable Assets and Bounded Rationality


  • Pierpaolo Pattitoni

    () (Department of Management, University of Bologna, Italy)

  • Marco Savioli

    () (Department of Economics, University of Siena, Italy; Faculty of Economics-Rimini, University of Bologna, Italy; The Rimini Centre for Economic Research (RCEA), Italy)


Several 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.

Suggested Citation

  • Pierpaolo Pattitoni & Marco Savioli, 2011. "Investment Choices: Indivisible non-Marketable Assets and Bounded Rationality," Working Paper series 07_11, Rimini Centre for Economic Analysis.
  • Handle: RePEc:rim:rimwps:07_11

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    References listed on IDEAS

    1. Svensson, L.E.O., 1988. "Portfolio Choice And Asset Pricing With Nontraded Assets," Papers 417, Stockholm - International Economic Studies.
    2. 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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    Cited by:

    1. 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.
    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. E. M. Cervellati & P. Pattitoni & M. Savioli, 2016. "Cognitive Biases and Entrepreneurial Under-Diversification," Working Papers wp1076, Dipartimento Scienze Economiche, Universita' di Bologna.

    More about this item


    Portfolio Choice; Investment Decisions; Asset Indivisibility; Non-marketable Assets; Bounded Rationality;

    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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