Portfolio Choice with Imperfect Capital Markets

In: Journal of economic studies, Band 7, Heft 3, S. 151-162

Abstract

In this paper we consider the effects of certain capital market imperfections on portfolio choice problems. We show that as a result of these imperfections, the distribution functions of rates of return may depend on portfolio allocation, thus leading to non‐convexities and consequently to patterns of specialisation rather than diversification.