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aJagannathan, Ravi.10aRisk Reduction in Large
Portfoliosh[electronic resource]:bWhy Imposing the Wrong
Constraints Helps /cRavi Jagannathan, Tongshu Ma. aCambridge,
Mass.bNational Bureau of Economic Researchc2002.1 aNBER
working paper seriesvno. w8922 aMay 2002.3 aMean-variance
efficient portfolios constructed using sample moments often
involve taking extreme long and short positions. Hence
practitioners often impose portfolio weight constraints when
constructing efficient portfolios. Green and Hollifield (1992)
argue that the presence of a single dominant factor in the
covariance matrix of returns is why we observe extreme positive
and negative weights. If this were the case th