Google Knows How to Make Money in Stock Markets?

Market Leader informed

American and German scientists made a curious discovery. It turns out that stock market players can get a helping hand in carrying out effective analysis of the current situation... from the world's most popular search engine, Google, or, to be more specific, its statistics for the frequency of inquiries about the names of companies involved.

 

Scientists prove their conclusions by behavior of a major stock market index – S&P500 which includes top five hundred US businesses. According to the research, if this index falls, there is an invariable increase in the number of Internet user inquiries about such a notion as subprime. It involves special, substandard mortgages for people who have certain ‘trouble’ with loans they have already taken out. Interest rates for such loans are a few times higher than the basis rate. Another example that demonstrates the existence of certain interrelations between stock markets and Google – bankruptcy of Lehman Brothers which also affected the index. This was coupled with an increased number of inquiries involving both the bank’s name and the financial crisis overall.

 

After spotting such regularities, scientists started analyzing the search engine’s capacity for forecasting within certain areas. For example, one of the studies was based on the number of week’s most popular Google searches related to names of S&P500-listed companies. The timeframe for these searches: 4 January 2004 – 30 May 2010. These figures were then compared by the scientists with how securities trading volumes actually changed over the week and how prices of each listed company’s stock behaved. The timeframe was identical - 2004-2010. As a result, experts found out: the number of deals with stocks of a certain company increases after a rise in user searches related to the relevant company. In turn, this relates to the fact that before buying stocks users rely on the opinion of other users and representatives of such companies rather than on their personal abilities and actions alone. This is why they type in relevant searches in the engine. However, this fact is also a way to get rich for conmen. For example, there were several 'businessmen’ of this sort arrested in the US last month as they used this opportunity to drive up prices of certain companies by publishing 'independent research’ in the web.

 

Unfortunately, scientists stated that the statistics did not ‘spill the beans’ for which transactions will be prevalent in the near future – selling or massive buying of stocks. Researchers say that they might forecast future price dynamics with higher probability if they had more detailed data of search inquiries in the engine. However, Google Trends ‘supplies’ information ‘on a weekly basis’.

 

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