Google queries predict stock market volumes

There’s a link between the number of Google searches performed on a company and the amount of financial trading in its shares, according to a German/US team.

Unfortunately, though, Google searches aren’t a good way of predicting stock market variations.

Financial markets and the ‘swarm intelligence’ of the internet are linked, say Tobias Preis and Daniel Reith of Johannes Gutenberg University Mainz, Germany and H Eugene Stanley of Boston University.

“We asked the question whether or not there is a link between search volume data and financial market fluctuations on a weekly time scale,” says Preis.

“Both collective ‘swarm intelligence’ of internet users and financial market participants can be regarded as a complex system of many interacting sub-units that react quickly to external changes.”

The team examined search engine query data from Google and found clear evidence that weekly transaction volumes of S&P 500 companies are correlated with weekly search volumes on their company names.

Thus, increasing transaction volumes coincide with an increasing number of search queries for the corresponding company name. Unfortunately for potential investors, though, there didn’t seem to be a correlation between changes in a company’s search volume and its stock price.

“Thus, search volume data seems to coincide with the attractiveness of trading a stock,” says Reith.