As unrest sweeps across the Middle East and oil prices climb, today’s economic climate could make any investor nervous.
But not Joey Engelberg.
Engelberg, an associate professor of finance at UNC, has conducted a research project with two of his former classmates at Northwestern University to gauge how well Google search trends can predict hot stocks.
The researchers used data from the website Google Trends to show that frequently searched terms can predict investor attention —which in turn causes temporary price spikes in the market.
Engelberg worked with Zhi Da and Pengjie Paul Gao, both professors at the University of Notre Dame, to publish “In Search of Attention,” a study relating Google and stock market trends, in December.
“The Google paper was born of a need for a better measure of investor attention,” Engelberg said.
He said investor attention is traditionally measured based on how often stock names appear in financial journals and on trading volume.
But those measures can be skewed predictors.
“No one reads every single article in the Wall Street Journal on a daily basis,” Da said. He said media focus on a stock doesn’t mean investors take interest in it.