Google Search Data May Foretell Financial Declines

As search marketers have long known, consumer queries are often driven by bad press, fear, and even hostility. 

In support of this notion, new research shows that increased Google search volume for terms like “dept,” “unemployment,” and “money” often presages stock market declines.

From 2004 to 2011, researchers from the U.S. and U.K. found increases in Google search volumes for keywords related to financial markets before stock market falls.

“Our results are consistent with the suggestion that … Google Trends data did not only reflect aspects of the current state of the economy, but may have also provided some insight into future trends,” according to the report's co-author Helen Susannah Moat, a social scientist from University College London.

Published in Scientific Report, the report further suggests that Google Trends data and stock market data may reflect two subsequent stages in the decision-making process of investors.

“Trends to sell on the financial market at lower prices may be preceded by periods of concern,” according to Moat. “During such periods of concern, people may tend to gather more information about the state of the market,” i.e., search on engines like Google.

Yet, as Moat and her fellow researchers caution: “Future work will be needed to provide a thorough explanation of the underlying psychological mechanisms that lead people to search for terms like ‘debt’ before selling stocks at a lower price.”

For their report, the researchers examined about 100 distinct search terms. In particular, "debt" proved to be one of the best predictors of future market fluctuations.

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