Google has launched a new area of Google Finance called “Google Domestic Trends.” Basically, it allows you to look at various sectors of the U.S. economy based on how they are performing in Google’s search index. The idea is that the volume of searches for related queries to a specific segment may “provide unique economic insight,” says Google.
That’s an interesting idea, but does is it actually smart to invest based on one search engine’s data? Google has a few compelling examples for why it could be.
Take a look at the retail sales chart below for the past couple of years. As you can see, the results predicted with the Google Retail Index are clearly closer then the predictions made without it. For a while it looks like the data is only marginally closer, but starting in 2009, it’s clear that the data is much closer to the actual results.
This isn’t the first time Google has wondered if its search index could predict economic activity. Back in April, it wrote about it on its research blog. But it’s interesting now that it clearly feels comfortable enough with the results of the data that it’s featuring it on its Finance site.
The actual data Google provides is rather open-ended. For each of the sectors, you can see the overall volume trends and compare it with the Dow Jones, S&P 500, the Nasdaq, or any ticker symbol, but it’s not as easy to compare it to actual trends like Google does in the graph above. Basically, it is putting the information it has out there, and you have to do your own homework with it.
Google continues to revamp its Finance site to make it more useful compared to its more widely-used competitors. Data is the key for all of this, so it’s probably a good idea to at least put it out there and see if investors are interested in seeing this. Other companies like StockTwits are already proving that there’s an appetite for some less than conventional means of investing.
As Gordon Gekko says in Wall Street, “The most valuable commodity I know of is information.”
[photo: flickr/artemuestra]
[Thanks Michael for reminding us of the Gekko quote]
The intelligence of Google system will be useful in different aspect of life. Go Google!!
No! I didn’t even have to read the entire article to answer.
I like!
An interesting concept, it could be part of a deeper investment strategy. But generally you want to act at the beginning of a trend; an increased search volume means the masses already know about it.
i believe the idea is more to focus your queries on economic indications of interest, such as searches for “buy an iphone” to predict how AAPL is doing with iphone sales.
completely agree with you in that people will search more on a specific stock. good article written by google economist hal varian in 2004 in the NY Times on this very subject: http://bit.ly/6mrYx
Good idea, but i doubt how far the search index data would match with financial commitments. Maybe economic activity can be judged approximately but not it an accurate way. Just this could be a source to analyze the economic status
I would rather invest on Facebook Lexicon data:
http://www.face...ook.com/lexicon
what? why?
Interesting indeed and fully plausible. Our site – Boardcentral.com – has been gathering historical data on message board searches/activities for years, and it proves many points above. We have all the data to prove the correlation between “social activities” and stock movements/volatility.
Just added Twitter’s stock-related information to the mix recently to have a “second opinion”. Combining the two you really get the invaluable data!
Drop me a note if anyone is interested in data and working together.
Maybe Google is like the king Midas, Everything he touches turn into gold.
But is there an app for that?
no chance
this is going to be one of the things that wallstreet traders read at 7 am every day
Doesn’t Efficient market theory apply to this? So its sort of useless in the long run?
There are companies out there who have been building out investment recommendations/insights for a few years now, such as Majestic Research.
Also, there are a few blogs out there that capture this very idea. For example: http://www.mark...swithsearch.com
For some reason this reminds me of what the now defunct Monitor110 was trying to do.
If there is a way to make money off this and everyone knows about it, as Kayode says, it is essentially going to be useless.
After last year’s financial meltdown, one would think prudent investment advice should be more closely tied to something besides “recent popularity on the internet”.
I would simply say they can do whatever they want, but it is almost impossible to combine the market trends and investors emotions with intelligence.
How in the world can a computer tell how the economy would shape up. It may affect those investors who follow it and even if it is correct it would be first come first serve sorts, where one who sees it first would maximize the use of the news he/she reads.
I know Google has the intelligence to make it, but does it have the intelligence to keep it always up with the dynamic market indices.
That is just my opinion though.
Sonal Maheshwari
USourceIT your single source for all IT needs
Ummmm… “are clearly closer then the predictions” or ‘than’ maybe?