The Next Hot Stock-Trading Tool? It Might Be Google
Google search terms might be used to predict the direction of the stock market and even outperform some of the best human portfolio managers.
That's according to new research published this week in the journal Nature.
A team of Big Data scientists looked at how often people searched terms like “economics” and "debt." Study co-author Suzie Moat of Boston University says the team implemented a simple trading strategy.
"If we found that people had looked for the word debt more this week, then at the beginning of the next week we would sell," she said. "And then a week later we'd close the position again by buying."
This hypothetical buy-sell strategy--executed only retroactively--could have scored a 326 percent return over eight years, the study calculated. A conservative buy-hold strategy that didn't consider Google data yielded 16 percent.
The bad news for eager day-traders? They say their strategy isn't something you can try at home just yet.