Online search tells market futures

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

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.

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