Investment choices: Indivisible non-marketable assets and suboptimal solutions |
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Authors: | Pierpaolo Pattitoni Marco Savioli[Author vitae] |
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Institution: | aThe Rimini Centre for Economic Analysis (RCEA), Rimini, Italy;bDepartment of Management, Faculty of Economics, University of Bologna, Via Capo di Lucca, 34-40126 Bologna, Italy;cFaculty of Economics, Rimini, University of Bologna, Via Angherà, 22-47921 Rimini, Italy |
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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. |
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Keywords: | JEL classification: G11 D81 |
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