A Cap-Axis Integral Diagnostic of Factor Models

Useong Shin

A Cap-Axis Integral Diagnostic of Factor Models

综合金融 2026-07-02 v1 计算金融数理金融证券定价统计金融

作者: Useong Shin

摘要

I propose a cap-axis integral diagnostic for factor-model evaluation. Low-dimensional factor models can improve the maximum-Sharpe frontier while leaving zero-alpha violations on economically fixed subspaces. The diagnostic studies one such subspace by lifting pricing errors into a bridge-alpha curve along the market-capitalization rank axis. Under an aggregate-market gate, a zero curve is equivalent to pricing the market's internal cap-rank subspace. In 1967-2024 CRSP data, q5's daily negative bridge attenuates under lead-lag correction, while Fama-French and Carhart bridges are more visible monthly. Across 154 factors, the cap-axis norm is distinct from Sharpe gain and size exposure.

引用

@article{arxiv.2607.01765,
  title  = {A Cap-Axis Integral Diagnostic of Factor Models},
  author = {Useong Shin},
  journal= {arXiv preprint arXiv:2607.01765},
  year   = {2026}
}