Study: Search Engine Chatter Can Aid Stock Picks

Researchers discovered a strong correlation between a stock’s overall performance and the number of times people search for it on the Internet, according to science publication Physorg.

Online search data can serve as a reliable predictor of stock returns and trading volumes, especially for smaller, noninstitutional investors who may not have a team of analysts who can measure investor sentiment more precisely, said Physorg. A soon-to-be-released paper by the researchers will reveal that a portfolio long on highly-searched firms and short on less frequently searched ones will generate returns of approximately 7 percent annually.

The team said that looking at stock searches can form a powerful supplement to someone’s already existing investment strategy, though the researchers didn’t endorse people using the method as their sole basis of whether or not to invest in a firm. According to the research team, a portfolio based on what other people are searching for needs to be updated on a regular basis as search patterns change, which could drive costs up. The portfolio would therefore need to be re-balanced just about every week.