Predicting Stocks. Become a Billionaire.
November 2, 2011
Web search and the stock market? MIT’s Technology Review examines the correlation in “Web Search Queries Predict Stock Market Trading Volumes.”
We’ve known that online searches can reflect real-world events; for example, searches about the flu parallel the spread of the flu and colds. The connection between Yahoo! queries and the stock market, unearthed by Matthieu Cristelli at the Institute of Complex Systems in Rome and his associates, seems a bit less straight forward:
“They say the volume of search queries related to companies on the NASDAQ-100 are correlated with the volumes of trades in those same companies in the following days. That’s surprising because Cristelli and co say that most web users check each stock of interest just once per month. This implies that they are not expert traders. So the effect emerges from the collective but uncoordinated activity of many inexpert users–a kind of wisdom crowds. Just why this should be the case is a mystery.
In the case of the flu, sufferers can be expected to research their symptoms online. There’s no such straightforward connection between those inexpert users and trading trends. Writer KentuckyFC posits that search terms could reflect more immediate influences, such as news stories or advertising blitzes.
Cristelli submits that following these queries can be of use, particularly in predicting financial distress. Hmm, perhaps we could have used this a few years ago. We recall that Hakia made a splash with a similar assertion earlier this year. Watch for new members of the world’s richest people list from the search community.
Cynthia Murrell November 2, 2011
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