Igboekwu, A., Liu, S., Tippett, M. and Burg, J. (2025). The generalised method of moments and the transformation of data. European Journal of Finance. https://doi.org/10.1080/1351847X.2025.2511028
Liu, S., Melia, A., Song, X. and Tippett, M. (2020). Singular diffusions, constant elasticity of variance processes and logarithmic rates of return. European Journal of Finance, pp.1-17. https://doi.org/10.1080/1351847X.2019.1709526
Liu, S., Yin, C., and Zeng, Y. (2021). Abnormal Investment and Firm Performance. International Review of Financial Analysis, Vol.78, 101886. https://doi.org/10.1016/j.irfa.2021.101886
with Yeqin Zeng
Betting Against Beta (BAB) portfolios, taking a long position on low-beta stocks and a short position on high-beta stocks, can generate significantly positive alphas (Frazzini and Pederson, 2014). For stocks' with a statistically insignificant beta, it is not appropriate to sort them based on their insignificant beta. Betting against statistically significant beta reduces the BAB portfolios' alpha by around 20% ~ 50% based on different beta estimations. We further find the alpha of BAB portfolios becomes negative and statistically insignificant when insignificant beta stocks are dropped and idiosyncratic volatility is controlled. One potential explanation of our findings is that the impressive performance of BAB portfolios is mainly driven by insignificant beta stocks. Our findings are robust to several specifications of beta estimations and in major international stock markets. Overall, our evidence reveals the importance of beta's statistical significance levels in BAB tradings.
with Chao Yin and Yeqin Zeng
We find that firms spend more cash on capital expenditures and R&D investment but less cash on acquisitions and payouts to shareholders and debtholders when their product market peers increase investment. We also find that peer investment is positively associated with the value of cash to shareholders. The positive effect of peer investment on the value of cash is stronger for firms operating in more concentrated industries and firms with more financial constraints. Overall, our evidence supports the industry dynamic view that firms use cash as precautionary savings to counter increased competitive threats from their product market peers.
with Yeqin Zeng and Douglas Cumming
We document a positive relation between firms’ customer concentration and product market threats. The positive relation remains robust after using matching-sample analyses and instrumental variable estimators to address potential endogeneity concerns. We also find that firms with higher customer concentration are more likely to be acquired in mergers and acquisitions and exhibit a higher risk of future financial distress. Our path analyses further reveal that a higher level of customer concentration leads to tighter financial constraints, lower profit margin, and greater operational uncertainty. These factors, in turn, contribute to greater product market threats. Overall, our study highlights the vulnerability of supplier firms in the product market when they heavily rely on a limited number of major customers.