A new study published today in Scientific Reports by a team of British researchers, though, harnesses Google Trends data to produce investing strategies in a more nuanced way. Instead of looking at the frequency that the names of stocks or companies were searched, they analyzed a broad range of 98 commonly used words—everything from “unemployment” to “marriage” to “car” to “water”—and simulated investing strategies based on week-by-week changes in the frequencies of each of these words as search terms by American internet users.

[…]

The strategy was relatively straightforward: The system tracked whether a word such as “debt” increased in search frequency or decreased in search frequency from one week to the next. If the term was suddenly searched much less frequently, the investment simulation bought all the stocks of the Dow on the first Monday afterward, then sold all the stocks one week later, essentially betting that the overall market would rise in value.

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During the period of time studied (2004-2011), making investment choices based on a few of these words in particular would have yielded overall profits several times higher than a conservative investment strategy of simply buying and holding the stocks of the Dow for the entire time. For example, basing a strategy solely on the search frequency of the word “debt,” which turned out to be the single most profitable term in the study, would have generated a profit of 326% over the seven years studied—compared to a profit of just 16% if you owned all the stocks of the Dow for the whole period.

Ref: Google Search Terms Can Predict the Stock Market – Smithsonian
Ref: Quantifying Trading Behavior in Financial Markets Using Google Trends – Nature