Select your localized edition:

Close ×

More Ways to Connect

Discover one of our 28 local entrepreneurial communities »

Be the first to know as we launch in new countries and markets around the globe.

Interested in bringing MIT Technology Review to your local market?

MIT Technology ReviewMIT Technology Review - logo

 

Unsupported browser: Your browser does not meet modern web standards. See how it scores »

This week’s fleeting stock market crash prompted by a false report from the Associated Press’s hacked Twitter account has focused attention again on the growing Wall Street practice of mining news and social data to make trades.

A study in Nature Scientific Reports today illustrates just how lucrative the right combination of algorithms could potentially be.

Using Google Trends, researchers analyzed the Google search query volumes from 2004 to 2011 for a set of 98 mostly finance-related search terms, looked at how stock prices changed over that same time, and tried to see if they could retroactively tease out search patterns that showed “early warning signs” of market moves. They also tested trading strategies that would act on these signs.

The volume of the search term “debt” turned out to be the word that showed the most promise, and one trading plan based on changes in searches for this term would have yielded a return of 326 percent over the period analyzed, the authors found. For comparison, a “buy and hold” investment in the Dow Jones Industrial Average yielded 16 percent return.

Of course, it’s easier to look at historic data and make hypothetical returns than to predict how well Google Trends-based trading will work over the next decade. However, as this study shows, it’s clear that the stock trading strategies based on the mining of real-time, public data sets will continue to become more sophisticated than what has played out this week.

 

Hear more from Google at EmTech 2014.

Register today

3 comments. Share your thoughts »

Tagged: Communications, Business, Google

Reprints and Permissions | Send feedback to the editor

From the Archives

Close

Introducing MIT Technology Review Insider.

Already a Magazine subscriber?

You're automatically an Insider. It's easy to activate or upgrade your account.

Activate Your Account

Become an Insider

It's the new way to subscribe. Get even more of the tech news, research, and discoveries you crave.

Sign Up

Learn More

Find out why MIT Technology Review Insider is for you and explore your options.

Show Me