Who said you can’t predict the stock market?

Unlike facebook, Google allows you to access much of their data. Google’s mission is to organize the world’s information and make it universally accessible and useful, not to garner information about you in order to make money. As we talked about in class, Google’s data can be used to predict amazing things, such as if there is going to be an outbreak of the flu. Simply by looking at their search queries, Google is able to make some pretty amazing predictions.

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It has recently been found that by using Google trends one can accurately predict what will happen in the market in the short term. If you have a free Google account you can access Google trends and by typing in keywords you can see how many times people searched those particular words. By looking at the trends and seeing for instance that there is an uptick in the searching of the word debt than you can anticipate that the market will go down in the near future. If you were to know that the market is going to plunge than by shorting it you could find yourself making a fair amount of money. Just three years ago you would not have been able to adequately predict the market because the data at the time was not large and fast enough. Data in its nature is getting bigger and faster which now allows one the ability to predict which way the market will go with decent certainty. Financial data is coming in every second during a trading day and this quick, high volume data is allowing many to more accurately predict the market. For instance, everyday computers use up to the second information for high frequency trading where they hold their investment position for seconds or only a fraction of a second. Data is certainly changing the marketplace and reshaping the way many invest.

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For years, economists would wait each month for government data releases on economic conditions. Now, by looking at what people are searching one can estimate the economic condition because there is simply enough data to make a reasonable conclusion. By using search results for financial terms on Google trends a group of researchers were able to increase their hypothetical portfolio by 326 percent whereas a constant buy-and-hold strategy yielded just a 16 percent return. Big Data is something that we did not have ten, even five years ago to the extent we do today. It is truly scary what we are able to predict with all this data. A person who can properly mine this data could make some seriously mad money. Enough that would even make old Jim Cramer proud.

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If you would like to read more about the topic:

http://www.forbes.com/sites/davidleinweber/2013/04/26/big-data-gets-bigger-now-google-trends-can-predict-the-market/?utm_campaign=techtwittersf&utm_source=twitter&utm_medium=social

 

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4 thoughts on “Who said you can’t predict the stock market?

  1. I find it remarkable that we can now predict the stock market fluctuations through data collected by Google Trends. Google does some pretty amazing things but a technology that can result in profits for both brokers and stockholders is unbelievable. Although I do believe that the data collected is accurate for the most part, there must be some errors or miscalculations in the system. If Trends could accurately predict all stock market movements, the majority of us would return a huge profit. We discussed in class how Google was consistently dealing with different types of ClickFraud. Just as data for advertisements is collected through clicks, Google Trends relies heavily on the upticks of searched words to influence their Trend. Additionally, what sort of problems could arise with a computer predicting the stock markets every move? Could it be misleading to a company or a stockholder? It will be interesting to see how accurate Google Trends tends to be in the future.

  2. It is interesting to see how the increasingly complex yet simple technological advancements are allowing for easier investing. I think this a more dangerous trend. How many times people search the word “debt” shows you what is in people’s minds and not is what really happening. Social media and technological advancements need to not be relied upon for financial gain just yet.

  3. This could definitely be a solution to help fix the economy. On the other hand, the public and widespread nature of this information makes it easy for a hacker to manipulate and skew data that is relied upon by millions of people. I just think that whenever you’re investing your hard-earned money, you should always be careful of quick tricks to making a few bucks; it could lead to a large scale disaster that you’re not prepared to deal with.

  4. Nice post! This is a great intersection of Google and big data, two really important class topics. And I agree with you, it’s pretty scary to see what Google has the power to do and to predict. However, I also agree with some of you classmates in that people may think they know what Google trends is showing, but really they don’t understand the data behind the numbers. This makes a more dangerous trend possible.

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