The Value of Software

130 Pages Posted: 18 Oct 2022 Last revised: 7 Jan 2025

Date Written: July 9, 2022

Abstract

Software is one of the most important assets that needs to be priced in the digital economy. It has emerged as a disruptive technology, with companies primarily valued for their software offerings growing from 2% to 13% of market share between 1996 and 2023. We document persistent anomalies in growth forecasts and stock returns for software companies, indicating significant deviations from rational expectations over multiple decades. Our findings are consistent with Bayesian investors gradually learning about software's growing importance, highlighting how markets can be very slow to discern fundamental shifts from transient shocks in noisy data.

Keywords: Digital economy, software valuation, asset pricing

JEL Classification: D84, G11 ,G12

Suggested Citation

Gomez Cram, Roberto and Lawrence, Alastair, The Value of Software (July 9, 2022). Available at SSRN: https://ssrn.com/abstract=4242504 or http://dx.doi.org/10.2139/ssrn.4242504

Roberto Gomez Cram (Contact Author)

London Business School ( email )

Regent's Park, London NW1 4SA
Regent's Park
London, London NW1 4SA
United Kingdom

Alastair Lawrence

London Business School ( email )

Regent's Park
London
United Kingdom

HOME PAGE: http://Www.alastairlawrence.net

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
702
Abstract Views
3,920
Rank
80,172
PlumX Metrics