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Web search queries can predict stock market volumes

  • Ilaria Bordino
  • Stefano Battiston
  • Guido Caldarelli
  • Matthieu Cristelli
  • Antti Ukkonen
  • Ingmar Weber

We live in a computerized and networked society where many of our actions leave a digital trace and affect other people's actions. This has lead to the emergence of a new data-driven research field: mathematical methods of computer science, statistical physics and sociometry provide insights on a wide range of disciplines ranging from social science to human mobility. A recent important discovery is that query volumes (i.e., the number of requests submitted by users to search engines on the www) can be used to track and, in some cases, to anticipate the dynamics of social phenomena. Successful exemples include unemployment levels, car and home sales, and epidemics spreading. Few recent works applied this approach to stock prices and market sentiment. However, it remains unclear if trends in financial markets can be anticipated by the collective wisdom of on-line users on the web. Here we show that trading volumes of stocks traded in NASDAQ-100 are correlated with the volumes of queries related to the same stocks. In particular, query volumes anticipate in many cases peaks of trading by one day or more. Our analysis is carried out on a unique dataset of queries, submitted to an important web search engine, which enable us to investigate also the user behavior. We show that the query volume dynamics emerges from the collective but seemingly uncoordinated activity of many users. These findings contribute to the debate on the identification of early warnings of financial systemic risk, based on the activity of users of the www.

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File URL: http://arxiv.org/pdf/1110.4784
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Paper provided by arXiv.org in its series Papers with number 1110.4784.

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Date of creation: Oct 2011
Date of revision: Jun 2012
Handle: RePEc:arx:papers:1110.4784
Contact details of provider: Web page: http://arxiv.org/

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  1. Jean-Philippe Bouchaud, 2009. "The (unfortunate) complexity of the economy," Papers 0904.0805, arXiv.org.
  2. Diego Garlaschelli & Stefano Battiston & Maurizio Castri & Vito D. P. Servedio & Guido Caldarelli, 2003. "The scale-free topology of market investments," Papers cond-mat/0310503, arXiv.org, revised Dec 2004.
  3. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
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