Tobias Preiss And Google Trends
April 28, 2013 Leave a comment
Google Trends, a tool that looks at patterns of searches on the internet, is a potential money-spinner for investors as it provides hints of impending stock movements according to a study led by Tobias Preis at the Warwick Business School in England .The researchers analysed data from Google Trends from 2004 to 2011.They looked at the volume of searches for 98 terms, such as “metals”, “stock”, “finance”, “forex”, “house”, “unemployment” and “health” as well as non-specific or neutral words, such as “ring”, “train”, kitchen” and “fun”.They then constructed a virtual portfolio of investment in the Dow Jones Industrial Average (DJIA), with a strategy based on search volumes that occurred on Sundays.If the search volume that day was high compared with a week earlier, the DJIA investment was systematically sold at the closing price the following day, and then repurchased at the end of the first day of trading in the week after.Conversely, if the search volume on Sunday was low compared with the previous week, the researchers “bought” the following day.Using the keyword “debt” – the term that saw the most fluctuation during the study period – the strategy netted a whopping cyber-profit of 326 per cent over seven years.By comparison, a strategy of buy-and-hold – purchasing in 2004 and selling in 2011 – would have yielded only 16 per cent profit, equal to the rise in the DJIA during this time.A third strategy, of buying or selling on the basis of movements in the Dow itself, would have netted a gain of 33 per cent.The 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 paper, published in the journal Scientific Reports, suggests that search requests are a potential indicator of intent about investment decisions.When a mass of people seek information about a particular subject on a Sunday, this is a sign of worry and boosts the likelihood that they will ditch stock when the market opens on the Monday.
The online world is a goldmine of data for behavioural experts.All these new data resources from online activities, which are an essential part of our everyday life these days – we are tweeting on Twitter, we are using Wikipedia, we are using search engines like Google and upload photos to Flickr and share information on Facebook – all of this leaves indicators of behaviour. Tobias Preiss and his colleagues,in an earlier study, have found that internet users from countries with a higher per capita gross domestic product (GDP) are more likely to search for information about years in the future than years in the past.
Egged on by what I have been reading,I keyed in finance in Google Trends.Check out the map on the page.I then had an Aha! moment.I always wondered why my blog was not uniformly popular worldwide.I tried explaining the traffic distribution with language,relevance of the subject matter of the posts,internet penetration etc.But interest in finance itself seems to be a factor.Does something like this exist for your blogs too?Do comment to let me know.