Abstract
Long-term block holding among large industrial corporations and financial institutions is prevalent in Japan. Little is known about the implications of such business practice on portfolio returns. We document the portfolio relationships of parent firms, sub firms and specific industry portfolios and we hypothesize that these relationships have changed substantially in Japan. Using certain measures for evaluating portfolios and mean-variance spanning, we test the hypothesis. Our empirical results suggest that market efficiency and integration of the Japanese stock market may have been greatly enhanced by the Japanese government's capital markets' liberalization measures, implemented in the 1970s and early 1980s.
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