Ok, so I hooked you in with that headline. Now I've go to deliver. Two researches in London and another at Boston University have published a study that followed Internet searches for words such as "portfolio," "inflation" and "economoics" and correlated that individual stock performance and overall market performance.
We know that many investors use the Internet for market research but can that use be translated into a market indicator. The formula the researchers came up with was back-tested from January 2004 to February 2011 and found that going long and short the market based on Internet searches for the word "debt" would have generated a 326% cumulative return versus buying and holding the Dow stocks over the same period wihch would have produced a 16% cumulative return. The program was set up such that it would sell the market short when the number of searches increased over the previous week and go long when the number of searches decreased from the previous week.
One point we can take away from this study is that according to the study, investors do more research when it comes to selling than they may do when buying. That's because there is a tendency to buy and hold and usually investors have to have a really compelling reason to sell, especially if the sale generates a loss. There may some human behavior theories implicit in this and it's also possible there may be some ego involved.
One of the researchers behind this idea has started an asset management firm based on his research. Who knows, he may become the next market sensation. in the meantime, it's an idea and perhaps one worth watching in concert with a sound and meaningful market strategy.