NEW YORK (MainStreet)—Is Google God? We already depend on it to tell us who we are, where to go and how to get there. It handles our email and keeps our calendar. But can Google master the stock market, too? Apparently so, according to research published today in Scientific Reports.
Previous studies have shown that data from Google Trends, a tool that analyzes search traffic on the Internet, can predict automobile sales, unemployment claims, and even consumer confidence. If so, perhaps it could forecast the stock market.
Apparently it can. Great googley moogley.
Researchers Tobias Preis, Helen Susannah Moat and H. Eugene Stanley factored the number of clicks resulting for certain search terms and found that Google Trends, can indeed predict market movement.
“Google Trends data did not only reflect the current state of the stock markets but may have also been able to anticipate certain future trends,” the researchers said in their report. “Our findings are consistent with the intriguing proposal that notable drops in the financial market are preceded by periods of investor concern. In such periods, investors may search for more information about the market, before eventually deciding to buy or sell. Our results suggest that, following this logic, during the period 2004 to 2011 Google Trends search query volumes for certain terms could have been used in the construction of profitable trading strategies.”
The researchers analyzed the search performance of 98 terms related to the concept of stock markets, with some terms suggested by the Google Sets service. They found that “key increases” in the price of the DJIA were preceded by a decrease in search volume for certain financially-related terms, and conversely, that key decreases in the price of the DJIA were preceded by an increase in search volume for certain financially-related terms.