Searching for Profits

A new study indicates that Google searches may be a predictor of stock market performance. Analyzing seven years of data from Google Trends, researchers looked at 98 search terms, recording how often they were used in comparison to the total number of searches. Finance-related terms such as “gold” and “unemployment” were included as well as more ambiguous words like “kitchen” and “garden.” This information was then compared to the Dow Jones Industrial Average (DJIA) closing price on the first trading day of each week for the period from January 2004 to February 2011. The results showed that the frequency with which certain finance terms appeared foreshadowed a positive or negative change in market performance.

When another group of researchers ran a buying and selling simulation using this information, they found that an investment strategy based on the search terms yielded a much greater return than a “buy and hold” or other random strategy.