November 15th, 2010
03:44 AM GMT
(CNN) - Economics, in a broad sense, is the study of how the financial decisions of billions of individuals coalesce into large trends that shape the way money is created, destroyed or transferred around the globe.
In that vein, physicists in Germany and the U.S. have released a study that shows how individual searches on Google correspond to large movements on the stock market.
The joint study by researchers at the Johannes Gutenberg University in Germany and the Center for Polymer Studies at Boston University looked at the stock moves of S&P 500 companies and compared them with searches of the company names on Google Trends from 2004 to 2010.
“Search engine query data offer insights into our economic life on the smallest possible scale of individual actions,” wrote the authors of the study, which was published Monday in the Philosophical Transactions of the Royal Society in the UK.
The researchers found the search activity on a particular company name increased in tandem with increased trading activity of the company stock as a whole - whether the stock price went up or went down. “Increasing transaction volumes of stocks coincide with an increasing search volume and vice versa,” the study authors wrote.
“Thus, one can conclude that search volume reflects the present attractiveness of trading a stock. But it seems that neither buying transactions nor selling transactions are preferred when one detects an increased volume,” the study said.
So, it appears to confirm both that news moves markets and that stock movements follow the herd. Only now the herd eats at the trough of constant information that’s a Google search away.
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