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Online search tells market futures

Researchers.

Researchers.

Google searches have been used to predict flu outbreaks, but could they also reveal ''early warning'' signs of sharemarket moves?

Researchers at the University of Warwick, in Britain, believe so.

They analysed Google searches from 2004 to 2011 - using the publicly available online ''Google Trends'' tool - to investigate information gathering before sharemarket trading decisions.

The researchers focused on search volumes for a set of 98 terms, mostly related to finance, debt and sharemarkets. Examples included: unemployment, debt, oil, war, gold, metals, inflation, debt, economics, Dow Jones and housing.

They found that capturing data changes in Google search behaviour "would have been able to anticipate certain future trends".

''Our results suggest that … search query volumes for certain terms could have been used in the construction of profitable trading strategies,'' they wrote in a paper published in the journal Scientific Reports this week.

In other words: investors could have used Google search data to their advantage.

In one case the researchers monitored use of the word "debt" in Google searches.

They found that, by basing their decisions on changes in its appearance in searches, they would have increased the value of their share portfolio by 326 per cent.

Using a "buy-and-hold" strategy, in which they held stock and waited for the market to give a good return, its value would have increased only 16 per cent.

The researchers concluded that combining large behavioural data sets such as financial trading data with that from online searches could lead to new insights into large-scale collective decision making.

"These results further illustrate the exciting possibilities offered by new big data sets to advance our understanding of complex collective behaviour in our society," they said.

Further work was needed, however, to understand the underlying psychological mechanisms that may lead people to search for more information about financial topics before selling stocks at low prices, they said.

twitter This reporter is on Facebook: /bengrubb

4 comments

  • I was discussing search-based forecasting back in 2011: http://www.smartcompany.com.au/online-sales/045213-20110811-are-we-searching-ourselves-into-a-recession-2.html - quite interesting!

    Commenter
    Chris
    Location
    Melbourne
    Date and time
    April 26, 2013, 11:27AM
    • And to think that market crashes are a Twitter away! Bow down all the worshippers of data analysis at the Google temple of Trends and Data Worship. Data insights can now make earn you a living? The God of Search claims when you use Google Glass, Google Vision, Google Trends, Google Commerce you will be able to know the future and thus complete its slavery over you. Glorifying google kingdom statistics at the expense of Wisdom. Stop thinking Start Googling you fools.

      Commenter
      inspector Rex
      Location
      Melbourne in Transition
      Date and time
      April 26, 2013, 6:00PM
      • Public domain information being used to influence share purchasing decisions. Now that is novel.......NOT!

        Commenter
        Cornucopia
        Location
        GC.....April love!!
        Date and time
        April 27, 2013, 6:09AM
        • Having not read the report, however from the first impression, such research seems not understand the mentality and reality of stock market investments. The market is not due to one set of factors that acted on by just one party. Numerous players mean that herd mentality would reduce any significant theoretical differences to meaningless levels.

          Commenter
          JJ
          Location
          Hornsby
          Date and time
          April 27, 2013, 7:54AM
          Comments are now closed
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