Interpretable Deep Learning for Stock Returns: A Consensus-Bottleneck Asset Pricing Model

We introduce the \textit{Consensus-Bottleneck Asset Pricing Model} (CB-APM), a partially interpretable neural network that replicates the reasoning processes of sell-side analysts by capturing how dispersed investor beliefs are compressed into asset prices through a consensus formation process. By modeling this ``bottleneck'' to summarize firm- and macro-level information, CB-APM not only predicts future risk premiums of U.S. equities but also links belief aggregation to expected returns in a structurally interpretable manner. The model improves long-horizon return forecasts and outperforms standard deep learning approaches in both predictive accuracy and explanatory power. Comprehensive portfolio analyses show that CB-APM's out-of-sample predictions translate into economically meaningful payoffs, with monotonic return differentials and stable long-short performance across regularization settings. Empirically, CB-APM leverages consensus as a regularizer to amplify long-horizon predictability and yields interpretable consensus-based components that clarify how information is priced in returns. Moreover, regression and GRS-based pricing diagnostics reveal that the learned consensus representations capture priced variation only partially spanned by traditional factor models, demonstrating that CB-APM uncovers belief-driven structure in expected returns beyond the canonical factor space. Overall, CB-APM provides an interpretable and empirically grounded framework for understanding belief-driven return dynamics.