Money illusion,beta perceptions,and capital market segmentation

This paper shown that in the context of tin; capital asset pricing model (CAPM), the existence of money illusion on the part of some investors induces segmentation in the financial market. That is, investors who suffer from money illusion would gravitate towards a subset of the securities available in the market, whereas investors who do not suffer from money illusion would gravitate towards the complementary subset of securities. This results in the invalidation of an important, corollary of the CAPM, i.e. all investors hold the market portfolio.