IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2607.01765.html

A Cap-Axis Integral Diagnostic of Factor Models

Author

Listed:
  • Useong Shin

Abstract

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.

Suggested Citation

  • Useong Shin, 2026. "A Cap-Axis Integral Diagnostic of Factor Models," Papers 2607.01765, arXiv.org, revised Jul 2026.
    • Handle: RePEc:arx:papers:2607.01765
    as

    Download full text from publisher

    File URL: https://arxiv.org/pdf/2607.01765
    File Function: Latest version
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2607.01765. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: https://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.