Google and the laws of supply and demand

[Enola Straight]

Could Google (and other search engines) be tapped as an instant indicator of the stock market?

Lets suppose on a certain day there is a million sites dedicated to the Ford flathead v8, but only a couple hundred search hits.

Lets also there are only eight sites dedicated to "electro-turbo-compounder-chargers", but hundreds of thousand of hits checking out this new technology.

If we allow sites as a function of supply and hits as a function of demand, can a Google insider scan their database for "hits per search"
as a market indicator as which companies to invest/divest?

[Ace Pace]

It's called Google Trends and you can probably code a mashup that combines search results + their Trend data rather quickly. Whether that information is sufficient to work the stock market, I am not qualified to say.

[Red]

:/ Armchair, citation-less rambling to follow.

Searches may not indicate demand
A minor story about United Technologies Corporation making a large donation to breast cancer research airs on the news. I can guarantee you that UTC searches will rise by a significant amount (partially due to people wondering who the heck UTC is!), but I would question that demand for UTC stock would rise in proportion.

Your example is a bit... disingenuous as well. I'm not sure searches for a specific product like "Ford Flathead v8" ties with general demand for the Ford stock.

Sites may not equate with supply
Google "wheat commodities" = 4,230,000 results
Google "Jessica Simpson" = 15,300,000 results
Seems the market is flooded with Simpson...

Ok, being a little silly now.
Google "wheat commodities" = 4,230,000 results
Google "mind control device" = 5,220,000 results
Shall I believe that the market supplies bushels of wheat with roughly equal levels as mind control devices?

Sites are created not only by companies involved with a product, but also by people interested in the product itself. Note that interest in the product is not directly equatable with interest in investing in the product, or interest in seeing the product succeed. For sites to equal supply, you'd have to make some assumption about the relationship of Total Sites to Companies Supplying.

An obvious counter might be that you're only concerned with internet searches for, and websites of, real marketable products. But the examples above beg the question, what do search and site counts mean? For the counts to be a good proxy of anything, you have to know what drives them.

[Darth Mall]

Also if you want to measure terms people are searching for, most often the people would be reacting to information they learned elsewhere, such as the news. Any information you would get would be delayed, and if it was having an effect on the market, it would most likely have already happened.

Stock prices are also based on much more than the perceived demand for information about a company/item. P/E ratios, expected growth, forecasted earnings, etc all would have a much bigger effect.

So what would happen would be, say Microsoft has higher earnings than expected, bringing up the stock price. This would then be shown on the news, which people would then go and google about.

In summation, no, your idea wouldn't really work, as any interest shown by google searches would be in reaction to price changes, not an indicator that they will change shortly

[Enola Straight]

I figured, if I knew "electro-turbo-compounder-chargers" hit rate were increasing every day, I would want to invest in whatever manufacturing firm was churning them out.

Also, If I knew Jessica Simpson's hit rate were likewise plummeting, I may want to divest myself from whatever stocks I have tied to her record label.

[Bunga]

If this were an effective or accurate way of gauging the stock market, one would have to look at the time rate of change of these searches, not the quantity of searches themselves. As Red illustrated, comparing mind control devices with wheat commodities is like comparing apples and oranges.

[Ace Pace]

If this were an effective or accurate way of gauging the stock market, one would have to look at the time rate of change of these searches, not the quantity of searches themselves. As Red illustrated, comparing mind control devices with wheat commodities is like comparing apples and oranges.

Which Google Trends can give you.

Note: I'm not advocating the OPs idea, just saying the data is out there for the taking.