Reuters: Technology News: Google-based trading strategy would have made big return: study

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Google-based trading strategy would have made big return: study Apr 25th 2013, 15:28 Tweet Share this Email Print Related News Google-based trading strategy would have made big return - study 11:23am EDT Analysis & Opinion Essential reading: TurboTax's lobbying fight, and more The Google signage is seen at the company's headquarters in New York January 8, 2013. Credit: Reuters/Andrew Kelly By Sudip Kar-Gupta and Alistair Smout LONDON | Thu Apr 25, 2013 11:28am EDT LONDON (Reuters) - A trading strategy based on changes in the number of times financial phrases are searched on Google could have generated returns in excess of 300 percent over the last decade on the Dow Jones, a study has found. The findings could prove particularly useful for computer-driven trading firms that use the Internet and Twitter to help gauge investor sentiment. The study by academics from Warwick Business School, University College London and Boston University, analyzed changes in the frequency with which 98 terms such as "revenue" and "unemployment" were used in searches from 2004 to 2011. Using the data to trade the Dow Jones Industrial Average Index would have returned a "substantial profit", they said. The study examined volumes of searches for a list of keywords - which Google makes publicly available - and sold the Dow Jones short at the beginning of the week if search volumes on the word were higher than the previous week, and bought the index if volumes were lower. "The initial hypothesis was that an increase in search volume was a sign of investor concern," said co-author of the report Dr Tobias Preis of Warwick Business School. By employing the strategy on the keyword "debt", for instance, an investor would have seen a return of 326 percent since 2004. (For the full report please click on: here) (Editing by Simon Jessop and Mark Potter) Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/ Comments (0) Be the first to comment on reuters.com. Add yours using the box above.

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