Google Web search trends could help predict the stock market's direction, according to a recent study.
"By analyzing changes in Google (GOOG) query volumes for search terms related to finance, we find patterns that may be interpreted as 'early warning signs' of stock market moves,” researchers wrote in Scientific Reports, the online publishing arm linked to the journal Nature.
When the volume of searches for terms like "debt" and "inflation" spiked, researchers took it as an indicator of investor concern. And shortly after those spikes occurred, researches saw dips in the Dow Jones Industrial Average, according to the study.
"We analyzed this over a period of seven years and found a remarkable correlation," said H. Eugene Stanley, one of the study's authors, on “Big Data Download.”
Researchers conducted their study using 98 different finance-related search terms and found that search volumes for "debt" were the best predictor of market dips.
From Jan. 5, 2004 to Feb. 22, 2011, hypothetical trades based on spikes in search volume for the word "debt" resulted in a return of more than 300 percent vs. a 16 percent return from an example of a "buy and hold" investment strategy, according to the study.
“These results further illustrate the exciting possibilities offered by new big data sets to advance our understanding of complex collective behavior in our society,” researchers wrote.
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