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Another fund manager, Paul, after reviewing Johns portfolio, expresses concern thatthe portfolio involves short-selling certain sectors and putting large weights on other sectors. He suggests
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Another fund manager, Paul, after reviewing Johns portfolio, expresses concern thatthe portfolio involves short-selling certain sectors and putting large weights on other sectors. He suggests that modifying the variance-covariance matrix by reducing the magnitude of the off-diagonal terms from the historical estimates would result in a less extreme portfolio than Johns portfolio . Do you agree? Why or why not? Explain in words without any calculation
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