VGSF - WU Vienna - LC

Roberto Gomez Cram, London Business School

Campus WU TC.4.03 room change! 11:00 - 12:15

Organizer VGSF

As part of the ser­ies of the "Fin­ance Re­search Sem­inar", VGSF wel­comes Roberto Gomez Cram from the Lon­don Busi­ness School to present his re­search pa­per.
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The Value of Soft­ware

Soft­ware com­pan­ies have stead­ily be­come key pil­lars of the di­gital economy, rep­res­ent­ing up­wards of 12 per­cent of U.S. mar­ket cap­it­al­iz­a­tion. A sim­ple buy and-hold strategy of pure-­play soft­ware com­pan­ies over the past three dec­ades pro­duced an­nual al­phas of over 7.1 per­cent. We doc­u­ment that these firms are grow­ing at 13.9 per­cent an­nu­ally and that both man­age­ment and ana­lysts sys­tem­at­ic­ally un­der­es­tim­ate over a third of this growth. We show that these ex­pect­a­tion er­rors ap­pear to largely ex­plain the fore­go­ing out­per­form­ance of soft­ware com­pan­ies and that man­age­ment, ana­lysts, short sellers, and other mar­ket par­ti­cipants ignore key per­form­ance in­dic­at­ors that describe these pure-­play soft­ware firms and sig­nal fu­ture growth. To­gether, the study un­der­scores the value of soft­ware to the economy and how its eco­nomic im­pact has been sig­ni­fic­antly un­der­-ap­pre­ci­ated for the past two dec­ades.

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