Study: Google Searches Could Predict Next Financial Crisis
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BOSTON (CBS Sacramento) – Google helps us find just about anything and everything on the Internet. Now a team of scientists say the powerful search engine may be able to help predict the future…the economic future, that is.
A new study finds that publicly available data from Google Trends can be used to forecast changes in stock prices, reports Live Science.
Researchers at Boston University and the University of Warwick, in the United Kingdom, grouped popular search terms into different topics. Then they used Google Trends to compare the search volume for each topic to fluctuations in in the Standard & Poor’s 500 Index from 2004 to 2012.
They discovered that Google users were more likely to search for topics related to business and politics in the weeks before a big drop in the stock market.
Searches related to other topics, like weather or music, had no correlation to market movement.
“The data we gather from Google gives us unprecedented insight into information large numbers of people are gathering,” study co-author Suzie Moat told Live Science. “Our study provides evidence that this information-gathering data can help us develop forecasts of actions people subsequently take in the real world.”
Moat says she and her fellow researchers believe using Google Trends may help predict other events in the real world.
“We are interested in financial markets, but also in domain areas far beyond this, such as human reactions to natural disasters, protests, crime, elections and disease spreading,” said Chester Curme, a graduate student in the department of physics at Boston University who contributed to the study. “We believe data on information gathering and dissemination may help us understand subsequent real-world actions in all of these areas.”
And Google isn’t the only site the researchers will be studying. Curme said his team is also looking at the information that people gather from sites like Wikipedia, Twitter and Flickr.
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