òòò½Íø Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
The Value of Software
òòò½Íø Review
(pp. 3514–58)
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 percent to 13 percent 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.Citation
Gómez-Cram, Roberto, and Alastair Lawrence. 2025. "The Value of Software." òòò½Íø Review 115 (10): 3514–58. DOI: 10.1257/aer.20230463Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- G12 Asset Pricing; Trading Volume; Bond Interest Rates
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- L14 Transactional Relationships; Contracts and Reputation; Networks
- L86 Information and Internet Services; Computer Software