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Nonmarketable Assets, Market Segmentation, and the Level of Asset Prices

1976; Cambridge University Press; Volume: 11; Issue: 1 Linguagem: Inglês

10.2307/2330226

1756-6916

David Mayers,

Corporate Finance and Governance

Mayers [6] presents a single period mean-variance model of capital asset pricing under conditions of uncertainty for the case where two kinds of assets exist; i.e., either perfectly liquid (marketable) or perfectly nonliquid (nonmarketable). This extended model implies the same linear form of the riskexpected return relationship as do the all marketable asset models of Sharpe [11], Lintner [3], and Mossin [7]. However, the results differ in two respects. First, the measures of the firm's systematic risk and the risk of the portfolio include the risk attributable to the existence of nonmarketable as2 sets. Second, the extended model implies that investors hold portfolios of risky marketable assets that vary widely in composition. Each investor holds a portfolio of marketable assets that solves his personal and possibly unique portfolio problem, and, hence the model allows for unique portfolios to be held 3 by investors. The Sharpe-Lintner-Mossin models (hereafter, SLM), of course, do not have this implication. That is, they imply that where all assets are marketable the portfolios held by investors are identical and consist of an investment in every outstanding security (each investor holds the market 4 portfolio).