The closing prices of the Dow Jones Industrial Average (DJIA) are shown
here as a black line, plotted against a colour code representing how the
number of searches by US users for the term ’debt’ changes over time.
Red shows an increase in searches, while blue shows a decrease.
Patterns in Google searches for financial terms could have been used as early warning signs of stock market movements, according to a new study published in Scientific Reports . Researchers from UCL Civil, Environmental and Geomatic Engineering, Warwick Business School and the Department of Physics at Boston University highlight the insights large data sets can give into collective decision making. While stock market data provide detailed records of the actions which drive market movements, they say little about how traders decide to take these actions. Dr Helen Susannah Moat (UCL Civil, Environmental and Geomatic Engineering) said: "We were intrigued by the idea that data from usage of online search engines might reflect how humans gather information before making decisions." Tobias Preis, Helen Susannah Moat and H. Eugene Stanley looked for relationships between records of searches on Google between 2004 and 2011 and movements of the Dow Jones Industrial Average. Their analysis of seven years of historical data detected increases in searches for financial market related keywords before stock market falls. The researchers identified a set of 98 terms, such as "debt", "stocks", "derivatives" and "finance", and investigated the behaviour of a simple hypothetical trading strategy based on how the frequency of searches for these terms changed weekly between 2004 and 2011. We were intrigued by the idea that data from usage of online search engines might reflect how humans gather information before making decisions.
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