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Agent Policy-Value Audit: Separating Transition Composition from Event Selection in Financial LLM Agents

Author

Listed:
  • Mingyang

    (Alex)

  • Chen

    (Andrew)

  • Yida

    (Andrew)

  • Xu

    (Aurora)

  • Huiwen

    (Aurora)

  • Chen
  • Yiming Lu
  • Wei Jin

Abstract

Financial LLM agents are often evaluated by comparing their end-to-end returns with those of a baseline and testing the paired difference against zero. This measures whether deploying the agent changes realized performance, but it does not isolate event-selection skill. An agent that frequently changes positions from flat to long can earn a positive paired return from an upward-drifting event pool even when it selects events at random. We propose the Agent Policy-Value Audit, which holds fixed the observed count of each ordered action-change type and randomly reassigns them across eligible events. The average payoff from these reassignments is the composition benchmark; the difference between observed deployment value and this benchmark is selection value. In semi-synthetic benchmarks based on real earnings-event returns, a zero-centered paired test falsely attributes passive exposure to selection skill in $11.6\%$ of no-skill replications, while the transition-matched audit reduces this rate to $5.3\%$. Applied retrospectively to 723 earnings events at 44 U.S. consumer-facing firms, the audit decomposes the agent's gross deployment value of $+15.2$ bps/event into a $+25.8$ composition benchmark and a $-10.6$ selection value. The agent does not detectably outperform matched random assignments. Financial-agent evaluations should report deployment value separately from event-selection value.

Suggested Citation

  • Mingyang & Chen & Yida & Xu & Huiwen & Chen & Yiming Lu & Wei Jin, 2026. "Agent Policy-Value Audit: Separating Transition Composition from Event Selection in Financial LLM Agents," Papers 2610.04040, arXiv.org.
  • Handle: RePEc:arx:papers:2610.04040
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    References listed on IDEAS

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