Get Bullish With Google's New Investing Weapon

Google has created a service that tracks Americans' search queries as compared to market growth—and it works.

The project, called Google Domestic Trends, is an outgrowth of the company's lead economist's research into whether Google search trends can help predict economic activity. In a post this past Spring, GOOG Chief Economist Hal Varian wrote that using a combination of Google Trends and Google Insights might allow researchers to know economic data almost in real-time (Varian then released a paper on the subject affirming the hypothesis—right-click to save PDF). That's good news for marketwatchers; right now, economists have to wait around 30 days to begin to tabulate a given month's economic data.

Google Domestic Trends puts the knowledge of Google Finance, Trends, and Insights into one cohesive tool, and tracks searches across 23 economic categories like automotive, unemployment and real estate. So what's it do? It allows you to compare search trends (say, "new car") to the activity of a given stock or stocks (say, "TM," or Toyota Motors).

So what have they learned so far? Using as a case study the new Google Retail Index and comparing it against past months' trade report data from the U.S. Census Bureau, Google's economists were able to decrease the margin of error of their predictions (over regular old Google Trends) by a statistically significant 44%.

Google Retail Index

Not only that, it's easy to use. The new interface looks and feels lot like Google Finance, since it's integrated into that service, and each search gives you a handy seven-day chart by default (January 2004 is used as the baseline date.) You can easily link to charts and results or download them in .XLS format.

Sound interesting? Check out the team's findings on unemployment (they're encouraging) or do your own stock search as compared to queries about airlines, computers, furniture, jobs and other categories.

[Via Google Finance Blog]

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