We investigate the properties of mean-variance efficient portfolios when the number of assets is large. We show analytically and empirically that the proportion of assets held short converges to 50% as the number of assets grows, and the investment proportions are extreme, with several assets...

Research on the implied cost of capital (ICC) has found that the equity risk premium is approximately 3%, on average, much lower than estimates based on the mean of historical stock market returns. The validity of such ICC estimates, however, faces both theoretical and empirical challenges. The...