"No man can become rich without himself enriching others"
Andrew Carnegie

Saturday, April 27, 2013

Can Google Searches Predict The Direction of Financial Markets?

Image representing Google as depicted in Crunc...
Image via CrunchBase
By Forbes

New York, Apr.27, best stock  .- Predicting the direction of financial markets is an enticing proposition that has attracted the interest of scores of experts, who claim to have the magic formula.
Some monitor financial charts. Others scrutinize balance sheets and operation statements. A third group monitors major indices, while a fourth group leaves it up to computers.

Now comes the WBS group–Tobias Preis, of Warwick Business School, Helen Susannah Moat, of University College London, and H. Eugene Stanley, of Boston University –to confirm a negative correlation between the frequency of Google GOOG -0.96% searches for 98 terms, such as ‘revenue’, ‘unemployment’, ‘credit’ and ‘nasdaq’, for the 2004 -2011 period.
But does correlation imply causality?
Maybe. As the authors point out, the rise of financial searches reflects growing worries among investors about the fate of their financial assets, which may eventually lead to sales of these assets, though further testing over a longer period of time are required.
The problem is that, since this finding is made public, it cannot be used to profit in financial markets, according to the Efficiency Hypothesis Theory.
That’s why I would not try to guess the direction of financial markets, but rather invest a set amount of funds in pre-determined intervals to different asset categories, adhering to the traditional rules of financial planning. ...
Enhanced by Zemanta