I'm reading the Barra risk model handbook (2004) available online and trying to understand the methodology. I've read a few materials on portfolio theory, so I can get at least the theoretical ideas behind a multi-factor risk model. But when you try to design one in reality, how do you test its predictions of the covariance between the assets? For an alpha model, you'll observe the subsequent realized alphas, and it's no big deal to compare your predictions with them. But isn't the realized covariance matrix practically impossible to compute fully (which is one of the reasons for decomposing the returns to a smaller number of factors in a risk model)? If so, how can we test the predictions of a risk model?