Google Trends, a tool that looks at patterns of searches and words that are trending on google search on the Internet ,could be a potential money-spinner for investors as it provides hints of impending stock movements, a new study by researchers have revealed on Thursday.
Research done by a group led by Tobias Preis at Warwick Business School in central England analysed data from Google Trends from 2004 to 2011
Tobias Preis is a German complex systems scientist. He is Associate Professor of Behavioral Science and Finance at Warwick Business School which is a department of the University of Warwick.Wikipedia.
Advanced Stock trading strategies
They looked at the volume of searches for 98 terms some of them below
The results from this study from Google Trends search query volumes for certain terms could be used in the construction of profitable stock trading strategies or stock trading software systems
The researchers made a virtual portfolio of investment in the Dow Jones Industrial Average (DJIA), and made a stock selection strategy based on search volumes that occurred on the search engine and taking in the trend data. Their strategy included selling the following day in the markets if the terms tracked had a high search volume and then repurchasing later. If the search volume on Sunday was low compared with the previous week, the researchers “bought” the following day.
Using the keyword “debt” from the trend data the term that saw the most fluctuation during the study period the strategy netted a whopping cyber-profit of 326 percent over seven years.
The paper suggests that search requests are a potential indicator of intent about investment decisions and the study also suggests when many people are seeking information about a particular subject or keyword on a Sunday, this is a sign of worry and gives signal that they are likely to ditch stock when the market opens on the Monday.
This research data goes to prove that profitable stock trading systems could possibly be built by using free available data from search engines