Monday, November 7, 2011

Google Trends & Insights

Nicholas Gruen at Club Troppo has posted on some recent research that Google Trends is a more reliable forecast indicator than a couple of the world's leading consumer sentiment indexes:
Forecasting Private Consumption: Survey-Based Indicators vs. Google Trends”, SIMEON VOSEN* AND TORSTEN SCHMIDT, RWI, Essen, Germany

In this study we introduce a new indicator for private consumption based on search query time series provided by Google Trends. The indicator is based on factors extracted from consumption-related search categories of the Google Trends application Insights for Search. The forecasting performance of the new indicator is assessed relative to the two most common survey-based indicators: the University of Michigan Consumer Sentiment Index and the Conference Board Consumer Confidence Index. The results show that in almost all conducted in-sample and out-of-sample forecasting experiments the Google indicator outperforms the survey-based indicators. This suggests that incorporating information from Google Trends may offer significant benefits to forecasters of private consumption.
Journal of Forecasting, 30, 565–578 (2011)
Ricardian Ambivalence has been playing with Google Trends searches on 'unemployment benefits' as a leading indicator for Australian unemployment. He has also employed a Google correlate feature to identify the closest correlation is with body piercings! I'm not sure if my Google skills are adequate but after a short play around it was difficult to get any meaningful specific results for Cairns because of inadequate data. However, these were the search results on a couple of broad terms: 

'Cairns Australia' (all regions): The spikes here are cyclones Yasi and Larry.

Great Barrier Reef (all regions): The letters flag news report links where 'B' is Steve Irwin's encounter with a stingray, and 'D' is the grounding of the Chinese ship.

Both these appear to show quite negative long term trends, or do my Google and interpretative skills need upgrading?

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