By using the Instrumented Principal Component Analysis (IPCA), this paper has found four latent risk factors in China’s A-shares market. These are idiosyncratic volatility, bid-ask spread, short-term reversal, and turnover. Based on these four IPCA mispricing characteristics, we build a mispricing factor that measures the long-term effect of mispricing. Then, we propose a four-factor model that uses the mispricing factor in addition to the market, size, and profitability factors and does a better job of pricing 36 anomalies. The tangency portfolio of these four factors achieves an out-of-sample Sharp ratio of 2.44.