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Google Can Predict Stock Market

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Google Can Predict Stock Market

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A new study reports that Google search terms can help predict whether the stock market will rise or fall.

The study from Warwick Business School in the United Kingdom and Boston University, title, "Quantifying Trading Behavior in Financial Markets Using Google Trends," shows that search terms can predict if the Dow Jones industrial average will rise or fall in the next week, according to the New York Times. The study was published last week in Nature's Scientific Reports.

Google Trends shows the popularity of search terms, which is why its data is considered indicative of future behavior. Researchers tracked 98 search terms between 2004 and 2011, including investment-related words and non-investment terms. They found that "debt" was the leading signal of a sell-off of shares, according to the report.

However, those looking for a hot tip via search terms may find that results aren't always accurate. Google Trends also reported a higher rate of flu than actually existed because of a rise in media coverage and discussions -- all of which showed up online. That means that sometimes a Google search term is only just that, and not a harbinger of doom.

 

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