Research note · November 3, 2026

Count the Holdings, Not the Assets: How Much Risk a Constrained Portfolio Hides

In a simulated AR(1) market, a long-only minimum-variance portfolio of 500 stocks fit on 250 days reports about 1/18 of the variance it carries. Dividing by (1 − d/m)², with d the number of holdings minus one, recovers it on average; for fewer stocks than days this is proved for any covariance and any linear constraints.