Online search tells market futures
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.
Frequently Asked Questions about this Article…
The University of Warwick researchers found that changes in Google search volumes for certain finance-related terms could have anticipated some future sharemarket trends. They concluded search query volumes might have been used to help build profitable trading strategies.
They analysed publicly available Google Trends data from 2004 to 2011, tracking weekly search volumes for a set of 98 terms related to finance, debt and the economy to see if search behaviour changed before market moves.
The study focused on 98 terms mostly related to finance, including examples like unemployment, debt, oil, war, gold, metals, inflation, economics, Dow Jones and housing.
The researchers suggest that Google search behaviour showed early-warning signals for some trends and could have been used in trading strategies. That said, the study describes historical results rather than a guaranteed method for future trading.
When the researchers based decisions on changes in the appearance of the word "debt" in Google searches, their hypothetical portfolio value would have increased by 326% over the study period, compared with a 16% increase using a simple buy-and-hold strategy.
The analysis used Google Trends data covering the period from 2004 through 2011.
The research was carried out by researchers at the University of Warwick in Britain and published in the journal Scientific Reports.
The study indicates Google search volumes could have helped anticipate some market trends historically and might inform trading strategies, but it does not claim search data guarantees future profits. The findings relate to past data and would need careful testing before being used in real investing.
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