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Updated · arxiv.org · Jul 6Any Axes Are Allowed: A Characteristic-Axis Integral Diagnosis of Factor Models
1 articles · Updated · arxiv.org · Jul 6Summary
- A new study introduces a characteristic-axis integral diagnostic to evaluate pricing errors in asset pricing factor models.
- The method analyzes bridge-alpha curves along value, profitability, investment, and momentum axes using CRSP data from 1967–2024.
- Findings reveal that factor models often over- or under-correct on specific axes, highlighting the importance of factor construction and alignment.