Factors in prominent asset pricing models are positively autocorrelated. We derive a transformation that turns an autocorrelated factor to a ``time-series efficient'' factor. Time-series efficient factors earn significantly higher Sharpe ratios than the original factors and contain all the...

Traditional asset pricing tests examine if factors covary with returns, if factor betas align with returns, or if mispricing is zero. We introduce a second-moment procedure that jointly tests these hypotheses for all assets in a single regression. The slope coefficients reveal the model's...

Equilibrium asset pricing models prescribe a correspondence between assets' risk exposures and premiums. Empirical factor models do not, however, satisfy this relationship. We show that a portfolio sorted on a multi-factor model's alphas is the optimal correction to this problem. This correction...