totally random

Just read this on Freakanomics:

A recent study in the Journal of Finance by Zhi Da and Paul Gao of the University of Notre Dame shows that data from public Google searches can be used to beat the stock market by up to ten percentage points per year. Similar findings were released last month by researchers at the University of Kansas.

The abstract for the research states:

We propose a new and direct measure of investor attention using search frequency in Google (Search Volume Index (SVI)). In a sample of Russell 3000 stocks from 2004 to 2008, we find that SVI (1) is correlated with but different from existing proxies of investor attention; (2) captures investor attention in a more timely fashion and (3) likely measures the attention of retail investors. An increase in SVI predicts higher stock prices in the next 2 weeks and an eventual price reversal within the year. It also contributes to the large first-day return and long-run underperformance of IPO stocks.

Interestingly, i posted about something similar a few years ago, while i did not go into too much detail nor was this ‘research’ my initial results indicated there was a correlation between search volumes and share prices.

I recently came up with an idea to analyze search volumes and compare these to the increase/decrease of listed companies on the JSE, to determine if there is any correlation.

When you consider search volumes it’s an indication of Interest in a company by all stake holders: Investors, employees, customers and the general public. While the share price is an indication of the market environment as well as investors confidence in the company.