This study examines the relation between bank equity ownership and corporate hedging in Japan, an economy where banks are allowed, to a certain limit, to hold shares of firms to which they lend funds. The results show that bank equity ownership is positively related to the corporate usage of...

In portfolio risk minimization, the inverse covariance matrix prescribes the hedge trades in which a stock is hedged by all the other stocks in the portfolio. In practice with finite samples, however, multicollinearity makes the hedge trades too unstable and unreliable. By shrinking trade sizes...