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Google Trends as a Stock Market Indicator?

Jul 02, 2009 - 7:50 AM EDT

Google Trends is a feature recently released from the Google (GOOG) empire. The Google Trends site allows users to mine through search data back to 2004 studying the broad patterns in search volume of particular words and phrases. Our study looks at the relative volume search for the phrase "market crash" from 2004 to the present. The spikes in search volume for "market crash" are compared with the Standard & Poor's 500 and the CBOE Volatility Index.

The charts below paint a very interesting picture. The charts highlights the four major spikes in search volume from 2007 to the present. The data between 2004 and 2007 show no spike above the 200% level. Coincidentally, the VIX had not registered a reading over 20% both indicating a time of calm in the equity markets. Yet, 2007 is when things got interesting.


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Source: Seeking Alpha (Jul 02, 2009 - 7:50 AM EDT)



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