FactorBench: A Portfolio-Aware Benchmark for Automated Factor Mining

Traditional finance relies on experts to hand-craft factors through a principled process grounded in economic rationale. Recent LLM-based multi-agent systems have automated this process, scaling factor mining far beyond manual effort. However, these automated approaches optimize directly for returns and rarely check whether a generated factor still expresses the economic hypothesis that motivated it. We identify this inconsistency between mathematical form and economic meaning as a structural failure mode of return-oriented automation. The resulting factors blur the line between real signals and spurious correlations and break down across regime shifts. We propose FaVOR (Factor Validation through Observable Reasoning), an agentic framework that restructures factor mining around hypothesis-level evidence rather than return outcomes. In place of the standard hypothesis-to-formula leap, FaVOR enforces a three-stage consistency loop tying mathematical form to economic rationale throughout. (1) Decomposition splits a broad economic hypothesis into independent observable conditions. (2) Validation checks whether each factor reflects its intended condition. (3) Integration merges them into a composite whose structure remains interpretable. On the CSI 500 and S&P 500 in 2025, FaVOR outperforms existing baselines while remaining effective across regimes. FaVOR shows that hypothesis-grounded factor discovery produces signals that are interpretable by construction, regime-robust, and economically faithful. The code is available at https://github.com/damilab/FaVOR.

Modern quantitative trading increasingly relies on systematic models to extract predictive signals from large-scale financial data, where alpha factor discovery plays a central role in transforming market observations into tradable signals. Recent LLM-based methods have shown promise in automating factor generation, but most of them still rely on prompt-level generation--evaluation--feedback loops for iterative optimization. As the loop becomes longer, repeatedly appended historical candidates and feedback can cause context explosion, increase inference cost, dilute useful information, and introduce feedback drift. Moreover, these methods often depend on very large LLMs whose stable generation preferences may lead to structurally similar expressions, redundant candidates, and search stagnation. To address these limitations, we propose \textsc{QuantEvolver}, a self-evolving alpha factor discovery framework based on reinforcement fine-tuning. Instead of accumulating feedback in the prompt, \textsc{QuantEvolver} converts executable quantitative evaluation into policy updates, enabling a Miner LLM to internalize historical optimization experience through parameter learning. Specifically, \textsc{QuantEvolver} constructs high-quality seed factors, builds diverse seed--time-window training tasks, generates executable Factor DSL expressions, evaluates them through Regime Backtest, and optimizes the Miner LLM with Diversity-Complementarity Reward. During training, high-quality factors are continuously accumulated in a Mined Factor Database, which serves as the final discovered factor library. Extensive experiments on three realistic market benchmarks demonstrate the effectiveness of \textsc{QuantEvolver}, which consistently improves the primary evaluation metric of each task over existing LLM-based alpha factor discovery baselines, produces higher-quality and more complementary factor pools.

Large language models (LLMs) have shown strong performance across diverse financial tasks, yet portfolio management (PM) remains poorly benchmarked. Existing benchmarks exhibit two gaps: they are often equity-only and ignore cross-asset correlations; they fail to evaluate the complete PM decision pipeline. We introduce PortBench, a benchmark spanning six heterogeneous asset classes from 2015 to 2025. PortBench comprises a static QA dataset of 6,269 questions across seven task templates and a dynamic five-stage allocation pipeline. To evaluate these layers, we introduce two metrics: a dual-layer correlation score for inter-class hedging and intra-class concentration, and CEPS, which quantifies how reasoning errors compound across pipeline stages. We further evaluate under three stress windows and three risk profiles, and support real-time evaluation to mitigate pretraining contamination on historical markets. Across ten frontier LLMs, strong financial QA performance fails to translate into superior portfolio performance: only 32.5% of 120 evaluations beat equal weighting on Sharpe across four market periods. Our source code is available at this https URL.