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In contrast to conventional SFA, we wish to deal with estimation risk, heteroscedasticity in noise and inefficiency terms. We investigate measurement error in the risk and return measures using a simulation\u2013extrapolation method and develop residual plots to test model fit. We find that shrinkage estimators for estimation risk makes a striking difference to model fit, dealing with measurement error only improves confidence in the model, and the residual plots are vital for establishing model fit. 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The authors certify that they have no affiliations with or involvement in any organization or entity with any financial interest or non-financial interest in the subject matter or materials discussed in this manuscript.","order":4,"name":"Ethics","group":{"name":"EthicsHeading","label":"Funding"}}]}}