Data provided by iNet BFA
Loading...
See More

Can Wikipedia predict the stock market?

May 11 2013 09:01

(Shutterstock)

Related Articles

Online ad revenue boosts Google profits

As virtual currency soars, fears do too

Guinea publishes mining deals online

Online retailer's bold move reaps rewards

SA still reading newspapers

Online sales top $1bn in one day

 
Cape Town - Wikipedia could have been used as an early warning sign of stock market movements, according to a new study published on Wednesday in Scientific Reports.

Researchers led by Dr Suzy Moat, senior research fellow at Warwick Business School in the UK, found that changes in how often financially related pages were viewed on Wikipedia could have been linked to subsequent movements of the Dow Jones Industrial Average.

Their historic analysis detected increases in views of financially related Wikipedia pages before stock market falls.

Moat said: “These results provide evidence that online data may allow us to gain a new understanding of the early stages of decision making, giving us an insight into how people gather information before they decide to take action in the real world.”

Wikipedia is a popular online encyclopaedia that all internet users can view and edit. Crucially, Wikipedia does not only make its contents freely available, but also data on how often people view and edit its pages.

Moat and Tobias Preis, also of Warwick Business School, along with Chester Curme, Adam Avakian, Dror Y Kenett and H Eugene Stanley of Boston University, USA, looked at how often the 30 pages describing the companies listed in the Dow Jones Industrial Average, such as Procter & Gamble, Bank of America, and The Walt Disney Company, were viewed between December 2007 and April 2012.

They found that a simple trading strategy based on changes in the frequency of views would have led to significant profits of up to 141%. (Click here to download graph).

Similarly, a strategy based on views of 285 pages relating to general financial topics, such as macroeconomics, capital and wealth, would have also generated profits of up to 297%.

A buy and hold strategy during this period would have led to a profit of only 3% profit. (Click here to download graph).

The researchers also measured how often these pages were edited during this period. No evidence was found that information on editing activity could have been used to anticipate stock market movements.

Trading strategies based on how often people viewed 233 pages relating to actors and filmmakers, a topic with less obvious financial relevance, were also not profitable.

Moat said: “We know that humans are more concerned about losing £5 than they are about missing an opportunity to gain £5.

"If investors spend more time and effort gathering information before making what they consider to be a bigger decision, then we might expect to see people looking for more financial information before stocks are sold at lower prices, in line with our results.”

Preis, Moat and Stanley have previously found links between Google searches and stock market movements.

Dr Preis, Associate Professor of Behavioural Science at Warwick Business School, said: “Our latest results provide further evidence that data on online information gathering may contain precursors of collective decisions taken in the real world.”
 
Click here to see the research paper Quantifying Wikipedia Usage Patterns Before Stock Market Moves published in Scientific Reports.


 

Follow Fin24 on Twitter, Facebook, Google+ and Pinterest.

online
NEXT ON FIN24X

 
 
 

Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
1 comment
Add your comment
Comment 0 characters remaining
 

Company Snapshot

We're talking about:

Small Business

A cash flow crunch often occurs in small businesses trying to balance cash coming in with cash going out. Watch this video to help you improve.
 
 

This is what banks do with your money

Gone are the days of saving cash under your mattress. Banks are now the custodians of your precious pennies, but what do they do with them?

 
 

Start saving...

Time the key for retirement saving
Dummy's guide to saving
Save money with affordable account
All about endowments

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...
Loading...