{"status":"ok","message-type":"work","message-version":"1.0.0","message":{"indexed":{"date-parts":[[2026,10,7]],"date-time":"2026-10-07T11:53:54Z","timestamp":1791374034020,"version":"4.3.1"},"posted":{"date-parts":[[2025]]},"group-title":"SSRN","reference-count":52,"publisher":"Elsevier BV","content-domain":{"domain":[],"crossmark-restriction":false},"short-container-title":[],"abstract":"<jats:p>Transaction costs determine which characteristic exposures are worth maintaining in equilibrium, yet standard stochastic discount factor (SDF) estimates often ignore them. We embed stock-specific trading costs into the no-arbitrage condition to identify a nonlinear SDF, which we estimate via adversarial neural networks across a large cross-section of U.S. equities. The transaction-cost-aware pricing kernel endogenously reallocates away from high-turnover fundamentals, improving cross-sectional pricing, mean-variance efficiency, and anomaly absorption. This reveals a taxonomy of implementation-dependent versus cost-invariant risk premia, with absorbed anomalies clustering among canonical limits-to-arbitrage signals. These findings hold across different cost specifications, market regimes, and a linear SDF specification.<\/jats:p>","DOI":"10.2139\/ssrn.5365375","type":"posted-content","created":{"date-parts":[[2025,7,25]],"date-time":"2025-07-25T11:26:36Z","timestamp":1753442796000},"source":"Crossref","is-referenced-by-count":0,"title":["Transaction Costs and the Stochastic Discount Factor"],"prefix":"10.2139","author":[{"ORCID":"https:\/\/orcid.org\/0000-0002-2321-2108","authenticated-orcid":true,"given":"Daniele","family":"Bianchi","sequence":"first","affiliation":[],"role":[{"vocabulary":"crossref","role":"author"}]},{"given":"Teng","family":"Jiao","sequence":"additional","affiliation":[],"role":[{"vocabulary":"crossref","role":"author"}]},{"given":"Hao","family":"Ma","sequence":"additional","affiliation":[],"role":[{"vocabulary":"crossref","role":"author"}]}],"member":"78","reference":[{"issue":"2","key":"ref1","doi-asserted-by":"crossref","first-page":"375","DOI":"10.1016\/j.jfineco.2004.06.007","article-title":"Asset pricing with liquidity risk","volume":"77","author":"V V Acharya","year":"2005","journal-title":"Journal of financial Economics"},{"issue":"7","key":"ref2","first-page":"58","article-title":"Direct estimation of equity market impact","volume":"18","author":"R Almgren","year":"2005","journal-title":"Risk"},{"issue":"3","key":"ref3","doi-asserted-by":"crossref","first-page":"43","DOI":"10.2469\/faj.v42.n3.43","article-title":"Liquidity and stock returns","volume":"42","author":"Y Amihud","year":"1986","journal-title":"Financial Analysts Journal"},{"issue":"5","key":"ref4","doi-asserted-by":"crossref","first-page":"2587","DOI":"10.1287\/mnsc.2022.4449","article-title":"Machine learning vs. economic restrictions: Evidence from stock return predictability","volume":"69","author":"D Avramov","year":"2023","journal-title":"Management Science"},{"issue":"1","key":"ref5","doi-asserted-by":"crossref","first-page":"235","DOI":"10.1146\/annurev-financial-073009-104041","article-title":"Martingale pricing","volume":"2","author":"K Back","year":"2010","journal-title":"Annu. 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